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Since the early 2020s, the Australian economy has faced several setbacks. From severe bushfires to the lingering effects of the Coronavirus pandemic and ongoing global supply chain challenges, many consumers remain cautious with their spending.
This economic climate has weighed heavily on businesses, leading many—whether small or large—to experience financial strain. When a company struggles to meet its debt obligations on time, it may eventually enter voluntary administration.
So, what is voluntary administration? And what happens when a business goes into voluntary administration?
What Is Voluntary Administration?
Voluntary administration is a process that can only be initiated when a company is insolvent or imminently facing insolvency.
The process involves appointing an administrator—also known as an insolvency practitioner—whose role is to conduct a detailed investigation into the company’s affairs and explore possible restructuring options.
An administrator may be chosen by the company’s directors, a secured creditor, or even by the court. In accordance with current legislation, any appointed administrator must be a registered liquidator with ASIC.
The primary purpose of voluntary administration is to give both the company and its creditors the opportunity to understand the full scope of the financial difficulties at hand. This independent review helps to identify the best course of action—whether that means restructuring the business, selling assets, or even winding up operations—in an effort to preserve value and repay debts.
The temporary protection afforded during voluntary administration allows companies to restructure without the immediate threat of claims from creditors, landlords, suppliers, or other parties. This breathing space can be crucial for realigning business operations and pursuing a viable turnaround strategy.
The most common suggestions made by a voluntary administrator include:
- Restructuring
- Selling the business
- Winding up the business
Administrators may also recommend alternative strategies, such as entering liquidation, proposing a deed of company arrangement (DOCA), or, if conditions allow, returning to normal business operations.
Some Other Concepts You Should Know
Below are some common terms you might encounter during the voluntary administration process. We’ve defined them clearly to help you understand your options:
Receivership
When a business goes into receivership, it means that a secured creditor has appointed a receiver to take control of and sell certain assets in order to recover the owed funds.
Bankruptcy
Bankruptcy occurs when an individual either applies for bankruptcy themselves or is declared bankrupt by a court.
Winding up
Winding up, which is synonymous with liquidation, means that the business is being permanently closed down with its assets sold and proceeds used to settle outstanding debts.
Who Is Involved In Voluntary Administration?
The voluntary administration process engages various parties, each with their own interests and priorities.
Here’s a breakdown of the parties that are generally involved:
| The Party | What They’re Interested In |
| The Company Itself | The directors and management generally aim to salvage the business and settle debts. |
| The Creditors | Creditors primarily seek repayment of their owed funds. |
| The Administrator/Insolvency Practitioner | The administrator is focused on investigating the company’s affairs and identifying the best course of action. |
What Happens When A Business Goes Into Voluntary Administration?
When a company enters voluntary administration, it does not necessarily mean the end of its journey. Instead, control of the company shifts to the appointed administrator, who then takes over the management of the business.
The directors lose their authority over the company, which can be a challenging and costly process. However, this time-out period shields the business from immediate creditor action, allowing for careful assessment and planning.
During this period, unsecured creditors are generally prevented from pursuing claims (unless permitted by the court or administrator), and neither owners, landlords, nor secured creditors can recover their assets or impose additional expenses on the company’s property.
Here are the key steps taken when a company goes into voluntary administration:
| 1. Assigning a Voluntary Administrator | A voluntary administrator is appointed by the directors, a secured creditor, or a liquidator. |
| 2. The First Creditors’ Meeting | Once appointed, the administrator must convene the first creditors’ meeting within eight business days (unless an extension is granted). Creditors receive notice of this meeting at least five business days in advance, where they discuss whether to change the administrator or form a committee of inspection. |
| 3. Investigation and Report | The administrator conducts a thorough investigation of the company’s affairs and advises creditors on available options. |
| 4. The Second Creditors’ Meeting: Deciding the Company’s Future | Within 25 business days of their appointment (unless extended), the administrator holds a second meeting to allow creditors to vote on the company’s future. Options typically include returning the company to its directors, approving a deed of company arrangement (DOCA), or proceeding directly to liquidation—with the administrator then becoming the liquidator. |
How Can I Prevent My Business From Entering Voluntary Administration?
Regardless of your company’s size, it is vital to keep a close watch on its overall performance and financial health.
If you’re currently experiencing financial difficulties or are concerned that your company might soon face voluntary administration, consider taking proactive steps to address any issues before they escalate.
1. Understand Your Company, Market and Industry
Keeping track of your company’s strategic, financial, and operational planning is essential. This comprehensive oversight allows you to better anticipate future challenges and growth opportunities.
It is equally important to stay informed about developments in your market and industry. Even a financially stable company can be affected by unexpected events—like the recent severe bushfire seasons or other economic challenges experienced in 2025. Staying ahead of industry trends will help you adapt more swiftly than your competitors.
2. Business Restructuring
Proactive planning can make all the difference. If your company is facing uncertainty, consider restructuring before the situation becomes critical. Reviewing your business structure and exploring alternative operational models can be a wise way to safeguard your business. Always seek professional advice prior to making any major changes.
Moreover, regular financial audits and strategic planning sessions can help you pinpoint potential cash flow issues before they escalate. Consulting resources such as our Legal Requirements for Starting a Business guide can provide valuable insights tailored to your industry.
For more comprehensive guidance on maintaining financial health and legal compliance, our Business Set Up Guidelines are designed to help you navigate these challenges effectively in 2025.
Need Help?
With ongoing economic pressures and unexpected events continuing to impact businesses in 2025, ensuring compliance with ASIC and other legal regulations remains a challenge—especially when you’re balancing multiple priorities.
While navigating the complexities of voluntary administration, it’s best to get legal help so you fully understand your options and the necessary steps ahead. Our range of legal services—from contract review and redrafting to detailed advice on business restructuring—ensures you have expert support every step of the way.
If you need help with any of the above, we’re here to support you. Our experienced lawyers can be reached on 1800 730 617 or at team@sprintlaw.com.au.
Also, be sure to monitor our Coronavirus resource page, which now offers updated insights into how past disruptions continue to influence business operations in 2025.
For further guidance, explore our comprehensive business resources, including our Business Set Up Guidelines and Company Registration Services, to ensure your business remains resilient in today’s challenging environment.
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