Voluntary Administration: When, where and how?

Introduction

Voluntary administration is in the headlines following the appointment of administrators to the David Jones group of companies on 5 November 2026, showing that even long-established businesses can face financial distress.  Receivers and managers were also appointed by the group’s secured lender, but in this article we will focus on the administration process. 

When a well-known business enters administration, customers, employees and suppliers naturally ask what it means. This article explains how voluntary administration works under the Corporations Act 2001 (Cth), how it differs from liquidation and receivership, and what it can mean for the people who deal with the company.

What is Voluntary Administration?

Voluntary administration is a formal process in which an independent 'administrator' (a registered liquidator) is appointed to take control of a company's business, property and affairs. The administrator investigates the company's position and recommends a course of action to creditors, aiming to save the company or, failing that, to achieve a better result for creditors than an immediate liquidation.

The directors remain in office but cease to control the company. This gives the company breathing space and, in some cases, a chance to continue trading afterwards. The administrator may be personally liable for certain debts they incur in performing their functions, with a right of indemnity from the company’s assets.

Voluntary administration, liquidation and receivership: what's the difference?

• Voluntary administration is a relatively short process to resolve a company's future, aimed at rescuing the company or, failing that, achieving a better return for creditors than liquidation.
• Liquidation winds up a company: a liquidator sells its assets and distributes the proceeds to creditors, after which the company is deregistered. Administration can ultimately lead to liquidation.
• Receivership is initiated by a secured creditor (such as a lender) to recover its debt, and the receiver acts for that creditor rather than creditors generally. It can run alongside administration, as with David Jones.

How does Voluntary Administration work?

A voluntary administrator can be appointed by:

• the company's directors, by resolving that the company is insolvent or likely to become so (the most common method);
• a liquidator or provisional liquidator of the company; or
• a secured creditor holding a security interest over all or substantially all of the company's assets.

Once an administrator is appointed, the process moves quickly. The key steps are:

• Directors' report - The directors report to the administrator on the company's affairs, generally within five business days.
• First meeting of creditors - Held within eight business days. Creditors can appoint a committee of inspection and replace the administrator.
• Investigation and second meeting of creditors - The administrator investigates and reports to creditors, then makes a recommendation at a meeting generally held within 25 business days (or 30 business days if the appointment is around Christmas or Easter, or if otherwise extended by the Court), where creditors vote on what happens next.

What are the possible outcomes?

Creditors decide the company's future, usually on the administrator's recommendation. The options are:

• Deed of Company Arrangement ("DOCA"). A binding agreement between the company and its creditors on how its debts will be dealt with, which may involve new funding, a sale of the business, continued trading, or a combination. It generally needs to offer a better outcome than liquidation.
• Return of the company to its directors. The administration ends and the directors resume control.
• Liquidation. If the company cannot be saved, it is wound up as described above.

Can creditors still make claims during the Administration process?

Generally, no.  During administration, a statutory moratorium generally restricts creditors from starting or continuing proceedings, enforcing against company property, applying to wind up the company, or recovering property used by the company without the administrator’s written consent or the Court’s leave.  Enforcement of guarantees given by directors or certain relatives is also restricted during the administration.

Some important exceptions apply, including for secured parties with security over the whole or substantially the whole of the company’s property, who have a 13-business-day decision period.  And a party to a contract with the company generally cannot terminate it simply because of the administration, although exceptions apply.

What does it mean for you?

Your position depends on your relationship with the company.

• Customers. If you have paid a deposit or prepaid, or hold a gift card, voucher or credit note, you are generally an unsecured creditor and may recover only part of what you are owed, or nothing. If the company is still trading, use vouchers promptly and think carefully before paying in advance.
• Suppliers and trade creditors. Amounts owed for goods or services supplied before the appointment are generally unsecured debts, and you must prove your debt with the administrator to vote and share in any return. Check whether you hold a registered security interest or retain title to goods supplied, and take care with any new supply.
• Employees. Employees generally remain employed unless terminated. Their entitlements have priority in a liquidation, and the Fair Entitlements Guarantee may be available.
• Landlords. Landlords generally cannot recover possession of premises during administration (subject to exceptions), but maybe entitled to rent accruing while the administrator occupies them.
• Directors. Directors lose control during the administration and must cooperate with the administrator. They should take advice early about their duties, any personal guarantees and the risk of insolvent trading.

Key take-away tips

If your company is facing financial difficulties, seek legal and accounting advice early, and make sure it does not incur further debts while insolvent, to avoid potential personal liability for insolvent trading and breaching directors' duties. The longer problems are left, the fewer the options that might be available.  So, early advice may open up alternatives such as negotiating with creditors or the 'safe harbour' protections for directors.

If you deal with a company in administration, read the administrator's notices, lodge a proof of debt if you are owed money, attend and vote at creditors' meetings where appropriate, check your security and ownership rights, and be cautious about extending further credit.

How can Sharrock Pitman Legal help?

We have extensive experience advising on voluntary administration and other insolvency matters. Whether you are a director of a company in financial difficulty, or a creditor, supplier, landlord or customer of a company in administration, we can explain your options and rights and help you decide on your next steps. Please contact Mitchell Zadow, Managing Principal and Accredited Specialist (Commercial Law), on 1300 205 506.

‍The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. For advice tailored to your specific circumstances, please consult one of our qualified lawyers.

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