Lost in Transition: Section 447A and the question of members' rights when a company transitions from voluntary administration to a creditors' voluntary liquidation
- Lawbook Co
- Publication Type:
- Journal Article
- Insolvency Law Journal, 2005, 13 (2), pp. 96 - 110
- Issue Date:
One of the benefits of voluntary administration under Pt 5.3A of the Corporations Act 2001 (Cth) is that it allows for a smooth transition from administration to a creditors' voluntary liquidation, particularly when the company cannot be returned to profitability by either the period of voluntary administration or under a subsequent deed of company arrangement. However, recent cases have posed the question as to the nature of the creditors' voluntary winding up into which insolvent companies transfer. This article examines these cases and argues that the transitional provisions in Pt 5.3A do not alter the substance of the subsequent creditors' voluntary liquidation, but rather merely provide an efficient gateway into a separate form of external administration. The scope and effect of the transitional arrangements between voluntary administration and creditors' voluntary liquidation is important because it frames the court's power to grant orders under s 447A. The authors argue that whilst s 447A orders may properly be made to give effect to the purposes of Pt 5.3A, they should not be made where the order dispenses with membership rights ordinarily accruing under voluntary liquidation.
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