Decision-making in a voluntary administration
This article discusses the decision-making procedure of Pt 5.3A of the Corporations Act 2001 (Cth). An initial review of the background to the provisions is undertaken which shows an emphasis on the creditors making a decision without any necessary review by the courts. This has placed considerable emphasis on the role of the administrator as a provider of information to the creditors to enable them to make a proper decision. The article then examines some aspects of the procedure by which this is carried into effect. Emphasis in the procedure is on making a decision quickly but despite this there is a lack of clarity in some areas and some improvement in the drafting may clarify what is required of administrators as well as facilitate the wishes of creditors. The method of voting used in the procedure is examined and subsequently measured against an economic and law analysis of how voting should be conducted. This suggests that the current form of voting does raise several difficulties including placing the administrator in the potential position of deciding his or her own fate and hence compromising the administrator's independence. In addition it is not clear if the division of creditors into number and value is particularly helpful. There has not been consideration of these issues from a policy perspective except in the most rudimentary manner. As making the "right" decision is critical in this context it is suggested the current system needs to encompass a sound theoretical basis. It indicates further research could be undertaken to examine issues such as the role of the secured creditor in the voting mechanism and the extent of the dichotomy between number and value in meetings.
Company and Securities Law Journal