voluntary admin process

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When a company is placed in Voluntary Administration it does not mean it is the end of the company or the business. Further, it is not an admission by the director of failure. Some advantages of placing a company into Voluntary administration are:-
1. It gives statutory protection from legal action.
2. Allows the director time to refocus and improve the business.
3. The administration can improve the profitability of the company.
4. It permits negotiation with company creditors.
5. Stops insolvent trading.
6. The company can continue to trade.
7. The director avoids personal liability.

When appointed, an administrator takes on the responsibility for trading, decision making and all liabilities incurred during the administration process.
Within five days of being appointed, an administrator must have a meeting of creditors, at which time the
administrator appointment is ratified or replaced by another administrator by a vote of creditors.

Within 28 days of appointment, a second meeting is held and a report is prepared to creditors after investigations by the administrator and a recommendation made to the creditors to either liquidate the company or enter into a Deed of Company Arrangement.

A Deed of Company Arrangement is one of the options available to creditors of a company placed in Voluntary Administration and cannot occur independently of a Voluntary Administration.

In simple terms, a Deed of Company Arrangement is a binding agreement between the company and its creditors which sets out how creditors’ claims are to be paid (in whole or in part) or reorganised, and how the company is to be released from the claims of the creditors.

This is a flexible and pragmatic mechanism. The precise workings will vary between Deeds, and may involve a realisation of assets, a compromise of all or some creditors’ claims, the injection of new capital, or any combination of such options. Ultimately, it is a flexible mechanism to enable an orderly resolution of the company’s insolvency and its rehabilitation.

Where a Deed of Company Arrangement is agreed to by the creditors, the Voluntary Administrator typically becomes the Deed Administrator. A Deed of Company Arrangement does not require Court approval however, it must be agreed upon by a majority of creditors voting in person or by proxy, at a meeting held during the Voluntary Administration.