If your business is experiencing financial distress, the question is rarely whether you have options. 

The real question is whether you’re choosing the right one. 

Over the past few posts, I’ve looked at ASIC’s recent review (ASIC Report 836) of Voluntary Administration and Deeds of Company Arrangement.  

Following my analysis of ASIC Report 836 in Parts 1 and 2, this article examines the practical considerations for directors and professional advisers when determining whether Voluntary Administration, Small Business Restructuring or Creditors’ Voluntary Liquidation may be the appropriate pathway. The articles are designed to be practical and accessible, helping advisers and directors generally identify when different restructuring pathways may be appropriate and why early advice remains critical. 

One of the report’s most important findings is that Voluntary Administration remains an essential restructuring tool, particularly for larger and more complex companies. 

That should provide reassurance to directors. 

But it also raises another question. 

If Voluntary Administration remains available, when should it be used? 

And just as importantly… 

When is another option likely to achieve a better outcome? 

After acting in more than 150 Voluntary Administrations, I’ve learned that successful restructurings rarely begin with choosing a process. 

They begin with understanding the business. 

There is no “best” restructuring option 

One of the biggest misconceptions directors have been that there is a preferred insolvency procedure. 

There isn’t. 

Voluntary Administration. 

Small Business Restructuring. 

Creditors’ Voluntary Liquidation. 

Each has an important place within Australia’s insolvency system. 

The challenge is understanding which pathway best suits the company’s circumstances. 

Choosing the wrong process can increase costs, reduce flexibility and, in some cases, destroy value that might otherwise have been preserved. 

Choosing the right process can preserve jobs, maximise returns for creditors and, in some cases, save the business altogether. 

Think of restructuring like visiting a specialist 

If you break your arm, you don’t walk into a hospital and ask for surgery. 

You ask a specialist to diagnose the problem first. 

Sometimes the answer is surgery. 

Sometimes it’s a cast. 

Sometimes it’s simply rest and rehabilitation. 

Business restructuring works in much the same way. 

A company with temporary cash flow problems requires a different solution from one burdened by unsustainable debt. 

A family-owned construction company faces different challenges from a national retailer. 

A technology business with valuable intellectual property requires a different strategy from a hospitality business with declining revenue. 

The diagnosis comes before the treatment. 

When Voluntary Administration may be appropriate 

Voluntary Administration is often the right choice where the business still has significant value that can be preserved. 

That may include situations where: 

• the company employs a substantial workforce; 

• multiple secured and unsecured creditors are involved; 

• the business has valuable contracts or goodwill; 

• there is investor interest; 

• a sale of the business as a going concern may be achievable; or 

• creditors are likely to receive a better return than through immediate liquidation. 

The process provides time. 

Time to investigate. 

Time to negotiate. 

Time to determine whether the business can be restructured or sold. 

As the ASIC Report 836 demonstrates, many Voluntary Administrations ultimately result in a Deed of Company Arrangement, while others preserve businesses through continued trading or a sale process. 

Voluntary administration is not simply a mechanism to avoid liquidation. It is a process to determine whether a better outcome can be achieved. 

When Small Business Restructuring may be the better option 

Not every business requires the complexity of a Voluntary Administration. 

Small Business Restructuring was introduced specifically to provide eligible smaller businesses with a simpler restructuring pathway. 

For many owner-managed businesses, SBR allows directors to remain in control while proposing a compromise to creditors. 

Where the business is fundamentally viable and the financial difficulties are capable of being addressed through a restructuring proposal, SBR may provide a practical and cost-effective solution. 

SBR is not a cheaper version of VA. It is a different statutory pathway. 

ASIC’s review recognises this reality, observing that for smaller businesses, SBR may be the more efficient and cost-effective pathway depending on the company’s circumstances. 

Again, the issue is not whether SBR is “better” than Voluntary Administration. 

The issue is whether it is better for that business. 

Sometimes liquidation is the responsible decision 

Directors often view liquidation as failure. 

I see it differently. 

Where a business is no longer commercially viable, an orderly liquidation may be the most responsible decision available. 

Continuing to trade while losses increase rarely benefits creditors. 

Nor does it assist employees, suppliers or directors themselves. 

An early liquidation can: 

• preserve company records; 

• reduce personal risk; 

• maximise asset recoveries; and 

• bring certainty to creditors. 

In many cases, recognising when restructuring is no longer realistic is just as important as recognising when it is. 

The biggest mistake is waiting 

Over many years in restructuring, I’ve noticed something interesting. 

Directors rarely call because they have too many options. 

They call because they think they have run out of them. 

The conversation often begins with: “I wish I’d come to see you six months ago.” 

Those words are remarkably common. 

By that stage, suppliers have stopped supplying. 

The ATO has commenced recovery action. 

Key employees have left. 

Working capital has disappeared. 

The legal options may still exist. 

The commercial options have become much narrower. 

Good restructuring advice isn’t about recommending one solution 

People sometimes ask me whether I “prefer” Voluntary Administration or Small Business Restructuring. 

The answer is simple. 

Neither. 

The value of an experienced restructuring specialist is not simply knowing the available options. 

It is the ability to assess the circumstances, explain the alternatives clearly and determine the pathway most likely to achieve the best outcome. 

Having undertaken more than 150 Voluntary Administrations, this is the practical judgement we bring to every engagement. 

Sometimes the right answer is Voluntary Administration. 

Sometimes it is Small Business Restructuring. 

Sometimes it is refinancing. 

Sometimes it is an orderly liquidation. 

The recommendation should always follow the facts—not the process. 

Final observations 

The ASIC Report 836 provides welcome confirmation that Voluntary Administration continues to perform an essential role within Australia’s insolvency framework. 

For directors, however, the report also highlights a broader lesson. 

Australia’s restructuring framework offers several pathways. 

Each serves a different purpose. 

The challenge is not finding a restructuring option. 

It is identifying the one that best fits the circumstances of the business. 

That decision should never be based on assumptions or hope. 

It should be based on careful analysis, commercial judgement and timely advice. 

Because in business restructuring, the most important decision is rarely choosing between Voluntary Administration, Small Business Restructuring or liquidation. 

The most important decision is seeking advice before circumstances make that choice for you. 

Our services 

Our digital booklet, Voluntary Administration vs Creditors’ Voluntary Liquidation Explained, is a practical resource for advisers and their clients, helping them understand the key differences between these two insolvency options. 

We also offer complimentary presentations for professional firms and their teams. 

David Levi has been appointed Voluntary Administrator to more than 150 companies, providing practical, real-world experience across a wide range of industries.