Ending a Means to an End: Transition from the Voluntary Administration Process to a Deed of Company Arrangement or Liquidation
[Introduction]: The voluntary administration procedure is a temporary one in the life of a company. It is a means to an end. That end is represented in the outcomes of the process. Part 5.3A provides that there will be three possible outcomes from the administration. They are liquidation, the entering into a deed of company arrangement or a return of the company to its pre-administration situation . Voluntary administration is ultimately a means by which the insolvent corporate entity may get to a position where a plan of reconstruction or reorganization will be put in place or the company will enter liquidation. In addition the court may terminate the administration in certain circumstances . These outcomes are worthy of a study in themselves but it is beyond the scope of this article to deal with these other forms of administration in detail. The focus of this article is the transition to these other stages in the life of the insolvent company. It is argued that this transition is a strength of the overall Part 5.3A process but that there are some gaps in the legislation that require consideration in the evaluation of Part 5.3A. In one sense the outcomes of the voluntary administration might be seen in the objectives for the Part 5.3A . These make it clear that the objects are to save as much of the business as possible and if that is not possible to gain a better return to creditors than would have been available in an immediate winding up. It is however the specific results that are measured against these criteria rather than the voluntary administration itself. Too much emphasis on the procedure leading to the outcomes may detract from an examination of the outcomes themselves. Accordingly it is necessary to examine the transition to determine how well the process of voluntary administration facilitates the achievement of the objectives. This article will cover issues that relate to the transition to the deed of company arrangement and the winding up of the company following voluntary administration. In so doing it is demonstrated that the transition to these other insolvency regimes is less regulated and less clear than the relatively methodical legislative regime for the administration itself. It is shown that the lack of legislative direction has resulted in the courts attempting to fill in the gaps. It is suggested that this does not always result in the best solution. It goes on to relate these matters to theory about the voluntary administration process based on the economics and law paradigm . The article makes several suggestions for law reform in these areas.
University of Tasmania Law Review