Administration FAQ's

ATO debt is split into four main areas: GST, income tax, PAYG, and superannuation. Company directors can be personally liable for PAYG and superannuation. If you have not lodged your Business Activity Statement (BAS), and your superannuation returns on time then you may be personally liable. The same applies to penalties or notices that have not been addressed.

In any of these circumstances, contact Australian Debt Solvers for a free consultation and professional advice.

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The difference between administration and liquidation revolves around the state of the company. The process of administration aims to help a company repay debts to avoid insolvency if it is a viable option. In comparison, liquidation is the process of selling all the company assets, repaying debts, and dissolving the company completely.

Read more about the difference between receivership, administration, and liquidation.

A company goes into administration after an administrator is successfully appointed. The administrator will assume the responsibilities of the directors and carry out their roles and responsibilities with the aim of paying off company debts.

If successful, the company will then be handed back to the directors. If unable to do so, the company will go into liquidation.

Whether it is through a DOCA or by returning to trading with insights from the voluntary administration process, going into administration can certainly help companies recover from financial strain. Part of the process of administration includes an inquiry into the business, its financial situation, organisational structure, and processes among other things. The administrator will then provide recommendations which will outline the prospects of a successful recovery.

Read our comprehensive guide to voluntary administration.

It is a requirement that employees are informed by the administrator if a company has gone into administration. What happens to employees will then depend on the recommendations of the administrator.

A restructure and turnaround may result in a change in organisational structure which could have an impact on some employees but not others.

Conversely, a company may go into liquidation which would result in the company winding up and employees losing their job. In this case, employees can get help through the Fair Entitlements Guarantee (FEG).

Learn what happens to employees when a company goes into liquidation

A Deed of Company Arrangement (DOCA) is an important agreement that defines specific legal requirements after a company goes into voluntary administration.

The document sets up a new working relationship between creditors and a company that has entered into voluntary administration. The purpose of a DOCA is to help businesses avoid liquidation and provide creditors with the best opportunity to recover any outstanding debts.

For further information, read our in-depth DOCA guide.

When a company is in financial distress, the common desire is to avoid liquidation and pave a path towards financial prosperity. Voluntary administration is often the most suitable solution due to the benefits it provides. They include:

• Inexpensive
• Provides breathing space required to properly assess the business and determine the most suitable outcome.
• Help directors avoid insolvent trading as it temporarily prevents creditors from enforcing their claims.
• Increase prospects of returning to profitability as an external administrator can look at the state of the business from an objective perspective and use their experience to provide expert recommendations.

Read our comprehensive Guide to Voluntary Administration for additional information.

Admitting that you are experiencing financial difficulties is no simple task. This applies across the board, from individuals to multi-national corporations. Some of the reasons why many directors wrongfully delay entering into voluntary administration include:

• Directors must give up control: Handing over control to an external administrator can be regarded as an admission of failure, but the biggest hurdle here is that the responsibility of the administrator is to creditors and not directors.
• No cost benefit: In many cases control of the company is returned to creditors but not after costs have been incurred. If a business is already experiencing financial difficulty, any unnecessary costs could cause further strain.
• Reputation: Insolvency proceedings such as external administration are made public. This can be seen as having an adverse impact on a company brand which could decrease its prospects of returning to profitability.

If a director decides to place a company into voluntary administration their responsibilities do not come to an end. They must:

• Relinquish control to the administrator.
• Assist the administrator. This may include providing financial records, information about the business including processes and key personnel.
• Prepare for possible outcomes by attending creditor's meetings and holding regular discussions with administrator.