Voluntary Administrations (VAs) allow insolvent companies to continue to operate whilst satisfying company debts.
Voluntary Administrations (VAs) allow insolvent companies to continue to operate, or, if this is not possible, they provide for a greater return to creditors than they would otherwise receive if the business was liquidated.
Directors usually instigate a VA when they believe the company is insolvent, or is likely to become insolvent (i.e. the company is unable to pay its debts as and when they fall due).
A VA appointment immediately suspends most creditors’ claims against the company.
Voluntary administration is suitable when a business is insolvent or likely to become insolvent, but there may still be a chance to save the business or achieve a better outcome for creditors than immediate liquidation.
It is commonly appropriate in situations such as:
Cash‑flow insolvency
The company cannot pay its debts as and when they fall due.
Serious financial distress, but viable core business
The business model may still work if debts are restructured, contracts renegotiated, or costs reduced.
Need for breathing space
Voluntary administration provides a moratorium on creditor enforcement, giving time to assess options without pressure from lawsuits or winding‑up actions.
Potential for a Deed of Company Arrangement (DOCA)
There is a realistic prospect of reaching an agreement with creditors to compromise debts or restructure the company.
Directors at risk of insolvent trading
Appointing an administrator can help directors limit personal liability for continuing to trade while insolvent.
Better return for creditors than liquidation
If continuing or selling the business as a going concern is likely to generate more value than winding it up.
It is not suitable where:
Voluntary administration is often chosen over liquidation because it offers flexibility, protection, and the potential to preserve value, whereas liquidation focuses on shutting the business down. Key reasons include:
| Voluntary Administration | Liquidation |
|---|---|
| Rescue-focused | Shutdown-focused |
| Temporary creditor protection | Asset realisation |
| Possible business survival | Business ends |
| Potentially higher creditor returns | Often lower returns |
A voluntary administrator can be appointed by:
This usually happens when directors believe the company is insolvent or likely to become insolvent.
Once appointed:
This gives the company “breathing space.”
The administrator reviews:
They may continue to trade the business if it preserves value.
Creditors vote on:
This meeting is mainly procedural.
Before the second meeting, creditors receive a detailed report explaining:
Creditors vote on the company’s future.
Possible outcomes:
As an insolvency specialist, we can help a business in financial distress by initiating voluntary administration to provide immediate protection from creditors and stabilise operations.
We’ll take control of the company, assess its financial position and viability, and continue trading where appropriate to preserve value.
We work with directors and creditors to develop a Deed of Company Arrangement (DOCA) to restructure debts or recapitalise the business, aiming to save the business or achieve a better return for creditors than liquidation while reducing directors’ exposure to insolvent trading.
It is a formal insolvency process where an independent administrator is appointed to take control of a company that is insolvent or likely to become insolvent, to assess whether the business can be saved or should be wound up.
When it cannot pay its debts as they fall due, or is likely to become insolvent, but there may be a chance to restructure or achieve a better outcome than liquidation.
Directors’ powers are suspended, but they must assist the administrator and provide company records and information.
Yes, if the administrator believes continuing to trade will preserve or improve value for creditors.
Employment usually continues. Wages and entitlements incurred during administration must be paid, and existing entitlements are protected and prioritised.
Generally no. A statutory moratorium prevents most creditor enforcement actions during the administration period.
A DOCA is a binding agreement between the company and its creditors that sets out how debts will be compromised or repaid.
Typically 20–25 business days, unless extended by creditors or the court.
Voluntary administration can reduce the risk of insolvent trading liability, but it does not eliminate liability for guarantees or misconduct.
The company may:
Voluntary administration focuses on rescue and restructuring, while liquidation focuses on closing the business and selling assets.
It can, but successful restructuring may preserve relationships better than liquidation.
Note: The information provided is for general purposes only. It is not financial or legal advice. Please get in touch with a qualified expert from our team.
