What is voluntary administration?
Voluntary administration, or VA, is a formal insolvency process under Part 15A of the Companies Act 1993. It’s usually started by the company’s board resolving to appoint an administrator, though a liquidator, a secured creditor or the court can also appoint one. The purpose is to maximise the chance of the company, or its business, continuing, or failing that, to get a better return for creditors than an immediate liquidation would.
In New Zealand it’s relatively rare. Companies Office figures typically show single-digit numbers of administrations each month, compared with hundreds of liquidations.
How voluntary administration works
- Appointment. The board appoints a licensed insolvency practitioner as administrator.
- Control passes. The administrator takes control of the company’s business, property and affairs. Directors’ powers are suspended.
- Moratorium. Most creditor enforcement is put on hold, though some secured creditors have a short window to act.
- Investigation. The administrator investigates the company’s affairs and prepares a report for creditors.
- Watershed meeting. Creditors vote on the company’s future: return it to the directors, approve a deed of company arrangement (DOCA), or put it into liquidation.
A DOCA is a binding agreement setting out how creditors will be dealt with, often a reduced or deferred payment. Once approved by the required majority, it binds unsecured creditors, including those who voted against it.
What administration means for you as an owner
| Voluntary administration | Refinancing | |
|---|---|---|
| Who runs the business | The administrator | You |
| Creditor enforcement | Paused by moratorium | Stopped because creditors are paid |
| Creditors receive | What the DOCA or liquidation provides | Payment in full |
| Fees | Administrator’s fees from company assets | Loan costs, priced on your circumstances |
| Outcome decided by | Creditors’ vote | You |
When there might be a better route
Administration’s big strength is the moratorium: breathing space from creditors while a plan is worked out. But if the reason the company needs breathing space is that it can’t pay a few pressing debts, IRD, a supplier who’s issued a statutory demand, or a short-term lender, then money in may solve the problem more directly.
Refinancing is worth looking at seriously before a VA if:
- the business is viable once the pressing debts are paid;
- there’s equity in New Zealand property, yours or a supporter’s, which means we can probably help with a property-secured loan from $20,000 to $1m;
- or there’s steady turnover that could support an unsecured cash-flow loan or business line of credit, even with weaker credit;
- you want to keep control and keep supplier relationships intact.
What a refinance can clear before a board meeting
If the board is considering an administration because of a handful of pressing debts, a refinance can often clear them first:
- IRD arrears, including GST and PAYE, paid directly at settlement;
- a creditor who has served a statutory demand, within the 15 working days;
- short-term or private loans with heavy repayments;
- supplier accounts whose holders are threatening action.
With those gone, the question for the board changes from “how do we manage creditors?” to “how do we run the business well from here?”
When administration may be the right call
For larger companies with many creditors, complex secured lending, or a business that needs restructuring beyond paying some debts, administration can be a sensible tool. If the numbers don’t support a loan, we’ll say so honestly.
Before the board meets
If a board resolution to appoint an administrator is on the table, pause for a day. Ask the proposed administrator the questions in our guide, questions to ask any insolvency practitioner, and check whether funding is realistic. Start an enquiry or call 03 667 4222.