Forms of external administration

Voluntary Receivership Liquidation

Administration
What is it?
Process where an insolvent Receiver Company assets distributed
company appoints an appointed by to creditors & shareholders &
external administrator to secured creditor business ends
take charge because co has
defaulted in loan SD can be challenged
repayment
How is it commenced?
Board Resolution SECURED Voluntary (creditors,
Major Security Creditor creditors members)
Liquidator Court (rare) ANYONE it owes money to
Ss436A-C
S420 power to Statutory demand 21 days
receivers

Insolvency Presumption
How does it end?
Co isnt insolvent Receiver paid Deregistration
1
DOCA (save!) debt Or go back to VA &
Enter liquidation Enter receivership
(s439C) liquidation
Impacts on directors/members/creditors
Directors Business Trading ends, legal entity
Deliver co books continues trading gone when deregistered.
(s438B) & submit RATA
within 5 days 438B(2) Directors Directors
Powers suspended Lose Powers suspended
management Report as to affairs
Members powers Members
Voids share transfer
(s437F) Creditors
Secured can enforce
Creditors Unsecured cant
Creditors cant sue Employees dismissed
MAJOR security
creditor can enforce
security (13 days)
Other
Quick & cheap Receiver Order pf priority (s556)
Admin accountable accountable 1. Secured creditors
Easy to start for debts 2. Expenses of winding
Minimal court involved incurred up/VA
during 3. Unpaid wages super
DOCA (no compulsory receivership other employee
court scrutiny) entitlements

1 Test = do creditors receiver higher dividend than in liquidation? Pt 5.3A

 Abuse of VA against
creditors (but DOCA can
be terminated)
Liquidators recovery
provisions for voidable
transactions2 doesnt
apply
Weak co likely 4. Unsecured creditors
to liquidate 5. Shareholders
Power to examine (s596A)
Powers of recovery (in
footnote)
Unfair director related
transaction s588FE(6A)

2 Unfair preferences s588FA , loans s588FD, uncommercial transactions s588FBA