If your company is facing financial distress but may still be salvageable, voluntary administration offers a structured way to assess its future. The board of directors can resolve to appoint a licensed insolvency practitioner to take control of the company and explore options for recovery, sale, or orderly closure.
What Is Voluntary Administration?
Voluntary administration is a formal process under the Companies Act 1993 where an independent administrator is appointed to:
– Investigate the company’s financial affairs,
– Assess whether the business can be saved,
– Recommend a course of action to creditors.
The goal is to provide a better outcome for creditors than immediate liquidation.
Legal Basis for Appointment
Under Section 239I of the Companies Act 1993, a company may appoint an administrator if:
– The board of directors resolves that the company is insolvent or may become insolvent, and
– An administrator should be appointed.
The appointment:
– Must be in writing and state the date of appointment,
– Cannot occur if the company is already in liquidation,
– Must be made within 10 working days of being served a liquidation application (if one has been filed), unless the application has been resolved.
Step-by-Step: How Voluntary Administration Is Initiated
1. Board of Directors Passes a Resolution
The board must:
– Form the opinion that the company is or may become insolvent,
– Resolve to appoint a licensed insolvency practitioner as administrator.
Timeframe: The appointment must be made in writing and filed with the Companies Office immediately.
2. Administrator Takes Control
Once appointed, the administrator:
– Assumes control of the company’s operations,
– Investigates financial affairs,
– Engages with creditors and stakeholders,
– Prepares reports and recommendations.
The company’s status on the Companies Register changes to “In voluntary administration.”
3. Creditors’ Meetings Are Held
Two key meetings are held:
– First creditors’ meeting (within 8 working days): Creditors may form a committee and confirm the administrator.
– Watershed meeting (usually within 25 working days): Creditors vote on the company’s future:
– End administration and return control to directors,
– Approve a Deed of Company Arrangement (DOCA),
– Place the company into liquidation.
What Happens During Administration?
The administrator:
– Reviews contracts, assets, and liabilities,
– May continue trading the business,
– Negotiates with creditors and stakeholders,
– Files reports with the Companies Office.
Directors remain in office but lose control of decision-making. They must assist the administrator by providing records and attending meetings.
Why Choose Voluntary Administration?
– Business recovery: Offers a chance to restructure or sell the business.
– Creditor engagement: Creditors vote on the company’s future.
– Legal protection: Pauses legal actions and enforcement.
– Professional oversight: A licensed administrator ensures transparency and compliance.
Summary of Key Steps and Timeframes
| Step | Action | Timeframe |
| 1 | Board resolves to appoint administrator | Immediate |
| 2 | Administrator files notice with Companies Office | Immediately after appointment |
| 3 | First creditors’ meeting | Within 8 working days |
| 4 | Watershed meeting | Usually within 25 working days |
| 5 | Outcome decided (DOCA, liquidation, or return to directors) | At watershed meeting |
Need Help with Voluntary Administration in New Zealand?
If your company is facing financial pressure, voluntary administration may offer a path to recovery or orderly closure. Working with a licensed insolvency practitioner ensures the process is handled professionally and legally.
Contact us today to explore whether voluntary administration is right for your business.
