Voluntary administration in Australia costs on average $83,000. This process is primarily used to save companies and businesses that are experiencing financial distress.
Understanding Voluntary Administration Costs
The average cost of a voluntary administration is a significant figure, reflecting the legal, accounting, and administrative work involved in managing a financially troubled company. This expenditure aims to facilitate a rescue attempt, offering a path to restructure and potentially continue operations rather than proceeding directly to liquidation.
| Aspect | Average Cost (AUD) |
|---|---|
| Voluntary Administration | $83,000 |
Key Benefits and Outcomes
One of the primary objectives of voluntary administration is to allow a company to avoid liquidation, preserving its business operations and potentially jobs. This process offers a structured approach to negotiating with creditors and finding a viable solution for the company's future.
Key outcomes and benefits often include:
- Business Preservation: The main goal is to keep the company afloat, allowing it to trade out of its difficulties.
- Creditor Compromise: Through a Deed of Company Arrangement (DOCA), creditors typically agree to compromise their claims. This often results in them receiving a fraction of what they are owed, commonly around 5 cents in the dollar. This compromise is a critical element that helps the company recover by reducing its debt burden.
- Structured Resolution: Provides a formal framework for addressing financial insolvency, offering a more controlled environment than immediate bankruptcy.
The Process and Its Aims
A voluntary administrator, an independent and qualified insolvency practitioner, is appointed to take control of the company's affairs. Their role is to investigate the company's financial position, report to creditors, and recommend a course of action. This could involve proposing a Deed of Company Arrangement (DOCA), which is a binding agreement with creditors, or recommending the company go into liquidation if a rescue is not feasible. The costs cover the administrator's fees, legal expenses, and other professional services required to manage the process effectively.
