Steps to protect your position before a client enters voluntary administration

Why timing matters for creditor recovery

When a company enters voluntary administration, the administrator takes control and investigates whether the business can be saved or restructured. During that process, unsecured creditors cannot begin, continue or enforce claims against the company without the administrator's consent or court permission.

The practical effect is immediate. You move from managing an overdue account to joining a creditor queue. The balance you are owed becomes a claim, and recovery depends on what assets remain, the administrator's costs, and the outcome creditors vote for at the second meeting.

The options you have before administration begins are usually broader than those available afterward. Once the appointment is made, your ability to secure your position, negotiate directly, or take recovery action changes significantly.

Source: ASIC INFO 74: Voluntary administration , A guide for creditors

Confirm what you are owed and what the contract says

Gather your contract, purchase orders, invoices, delivery records, approved variations and payment history. Reconcile the balance you believe is outstanding, including any amounts the customer has disputed or queried.

Check your contract terms for any retention of title clause, security interest, or payment conditions that may affect your position if the customer becomes insolvent. If you have registered a security interest on the Personal Property Securities Register, confirm that the registration is current and covers the relevant goods or account.

A security interest registered before insolvency may improve your position in administration, but registration alone does not guarantee recovery. The specifics depend on what was supplied, whether it remains identifiable, and the timing of the registration and administration.

Source: PPSR: Why register on the PPSR

Review your current and planned exposure

List what the customer owes you now, what work or supply is planned but not yet delivered, and what deposits or progress payments you hold or expect to receive. Separate confirmed commitments from work that has not yet been formally approved or scheduled.

Decide whether you will continue to supply or perform work while the account is overdue. Continuing to deliver materials or services while a large balance remains unpaid increases your total exposure if administration follows.

Stopping supply or suspending work may have consequences under your contract. Before you take that step, review your contract terms and consider getting advice on whether suspension is permitted and what notice or conditions apply.

Take action while negotiation is still possible

If payment is overdue and explanations are vague or changing, contact the customer in writing and request a clear explanation and payment date. Keep the correspondence professional and document what was promised and when.

If the customer acknowledges the debt but says payment will be delayed, ask for a specific date and written confirmation. An acknowledgment of debt in writing can be relevant later if recovery becomes necessary.

Where the debt is substantial and the customer is not responding, consider whether formal demand, legal action, or Security of Payment rights are appropriate. These options depend on the facts, your contract, and the applicable law. The window to act may close once administration is announced.

What happens once voluntary administration begins

The administrator must hold a first meeting of creditors within eight business days, then investigate and report on the company's position. A second meeting is held within 25 business days unless the court allows an extension, where creditors vote on the company's future.

Creditors can vote to return the company to the directors, approve a deed of company arrangement, or place the company into liquidation. If a deed is approved, unsecured creditors are bound by its terms even if they voted against it.

There is no fixed rate of return for unsecured creditors in voluntary administration or under a deed. The outcome depends on the assets available, the administrator's costs, any secured creditor claims, employee entitlements, and what the deed proposes.

Source: ASIC INFO 74: Voluntary administration , A guide for creditors

Register your claim promptly if administration is announced

If you receive notice that a voluntary administrator has been appointed, follow the instructions in the notice. Complete and return the proof of debt form with supporting documents before any deadline specified.

Provide invoices, contracts, delivery records, payment history and correspondence that establishes what you supplied, what was agreed, and what remains unpaid. The administrator will assess claims for voting purposes and, if applicable, for distribution under a deed or in liquidation.

Attend or vote at the creditors' meetings. Your vote is calculated by reference to the debt the administrator admits for voting purposes. You can nominate an alternative administrator at the first meeting or vote on the proposed outcome at the second meeting.

Source: ASIC INFO 74: Voluntary administration , A guide for creditors

Practical steps to take now

Identify accounts where payment is overdue, the balance is material, and the customer's explanations are becoming less reliable. Set a date to review each account and decide on a proportionate next step.

For accounts where you are still supplying or performing work, review your contract terms and decide whether further work should proceed, be suspended, or require payment upfront. Document the decision and communicate it clearly in writing.

If you need advice on your rights, the available recovery options, or how to respond to a customer showing signs of financial difficulty, contact a professional before the situation moves to formal administration. Once the administrator is appointed, the practical options narrow and the process is governed by statute.