What is the difference between voluntary administration and liquidation in Australia?

Voluntary administration (VA) is a process designed to give a financially distressed company breathing space while options are explored — the outcome might be a Deed of Company Arrangement (DOCA) that allows the business to survive, or it might lead to liquidation. Liquidation is the process of winding up a company's affairs, realising its assets, paying creditors as much as possible, and then dissolving the company. VA is not necessarily the end — liquidation always is.

Who controls the business in voluntary administration vs liquidation?

In voluntary administration, an administrator (a registered liquidator) takes full control of the company from the moment of appointment. Directors step back entirely — they do not run the business, sign contracts, or access company bank accounts without the administrator's approval. In a creditors voluntary liquidation (CVL), a liquidator is also in control — their role is to realise assets and distribute proceeds to creditors. In both cases, directors lose day-to-day control immediately upon appointment.

What is a Deed of Company Arrangement (DOCA)?

A DOCA is a binding arrangement between a company and its creditors, voted on at the second creditors meeting during voluntary administration. It sets out how creditors will be paid — typically a lump sum, reduced payment, or extended terms. If creditors vote to accept a DOCA, the company is no longer in administration and can continue trading under the terms of the deed. A DOCA is the mechanism by which a business survives voluntary administration. If creditors reject the DOCA proposal, the company usually goes into liquidation instead.

How long does voluntary administration take?

The core voluntary administration process takes approximately 20–25 business days from appointment to the second creditors meeting, where creditors decide the outcome. If a DOCA is approved, the administration ends and the DOCA becomes operative — its term varies depending on what the deed says. Complex administrations involving large businesses or contested matters can take longer, but the basic statutory timetable is around 4–5 weeks to the second meeting.

Voluntary Administration vs Liquidation in Australia — What's the Difference?

Q: What happens to employees, contracts, and leases in voluntary administration?

In voluntary administration, employee contracts continue unless the administrator decides to terminate them — the administrator can choose to retain staff to keep the business operating. Contracts with customers and suppliers also generally continue, though counterparties may have termination rights triggered by insolvency events — the administrator reviews these carefully. Leases are a common complexity: the administrator can disclaim unprofitable leases with court approval. In liquidation, all employment contracts are terminated, leases are typically disclaimed, and ongoing contracts cease.

Published May 2025By True Tally Bookkeeping9 min read

Two Different Problems, Two Different Processes

Voluntary administration and liquidation are both formal insolvency processes under the Corporations Act — but they serve fundamentally different purposes. Understanding the difference matters because choosing the wrong one at the wrong time can cost creditors money, cost directors their personal assets, and determine whether a business has any chance of survival.

The short version: voluntary administration is used when there might be a path forward. Liquidation is used when there isn't.

Voluntary Administration: The Process

Voluntary administration is governed by Part 5.3A of the Corporations Act. The process is designed to give a company in financial difficulty a protected period to assess options — with the moratorium on creditor action providing the space to do so.

Who can appoint an administrator?

The directors of the company (most common)
A secured creditor who holds a charge over substantially all of the company's property
A liquidator or provisional liquidator already appointed

What happens from day one?

The moment a voluntary administrator is appointed, they take full control of the company. Directors step back — they cannot sign contracts, access bank accounts, or make management decisions without administrator approval. A moratorium on legal proceedings begins: creditors cannot issue statutory demands, commence court proceedings, or enforce security without leave of the court.

The 20–25 business day investigation

The administrator investigates the company's financial position — reviewing the books, assessing the viability of the business, and identifying the options available to creditors. The administrator holds a first creditors meeting within 8 business days of appointment, at which creditors can replace the administrator if they choose.

The second creditors meeting

At the second meeting (held approximately 20–25 business days after appointment), creditors vote on one of three outcomes:

Deed of Company Arrangement (DOCA) — a binding arrangement with creditors that may allow the company to survive
Liquidation — the company is wound up and assets distributed
Return to directors — the company is returned to director control (rare, usually means the company was not insolvent after all)

The Deed of Company Arrangement (DOCA)

A DOCA is the mechanism through which a company can survive voluntary administration. It is a formal, binding agreement between the company and its creditors — approved by a vote at the second creditors meeting.

A DOCA typically sets out:

What creditors will receive (a lump sum, reduced payments, extended terms, or some combination)
The timeframe for payment
What happens to the company's ongoing operations
Who funds the DOCA (often a related party, investor, or the company's own future trading revenue)

For a DOCA to be approved, the administrator must be satisfied that it is in creditors' best interests — meaning creditors would receive more under the DOCA than in an immediate liquidation. If creditors reject the DOCA proposal, the company goes into liquidation.

Liquidation: The Process

Liquidation (winding up) is the process of formally ending a company's existence: assets are collected and sold, creditors are paid in the statutory order of priority, and the company is deregistered. There are three main types:

Creditors Voluntary Liquidation (CVL)

The directors resolve to wind up the company — typically because it is insolvent and the directors accept there is no viable path forward. A liquidator is appointed. This is the most common form of liquidation for small businesses in Australia. The directors initiate it, but control passes immediately to the liquidator.

Members Voluntary Liquidation (MVL)

Used for solvent companies that the owners want to wind up — for example, a company that has fulfilled its purpose, or a restructure that requires closing one entity. A solvency declaration is required. This is not an insolvency process.

Court-ordered liquidation

A creditor applies to the court to wind up the company — typically after a statutory demand has been ignored. The court appoints a liquidator. Directors had the option to initiate a CVL before this point and lost that opportunity.

Who Controls Each Process

Process	Who Controls	Directors' Role
Voluntary Administration	Administrator	Step back; assist with information
Small Business Restructuring	Directors (SBRP assists)	Remain in control
CVL	Liquidator	Step back; assist with information
Court Liquidation	Court-appointed liquidator	Step back; comply with court orders

Costs Comparison

Costs vary significantly by complexity, but as a general guide:

Voluntary Administration: $30,000–$100,000+ in practitioner fees, depending on size and complexity. Larger companies can cost significantly more
Creditors Voluntary Liquidation: $8,000–$30,000 for a simple small business. More complex situations — where there is litigation, asset disputes, or insolvent trading investigations — can cost significantly more
Small Business Restructuring: $10,000–$30,000 in SBRP fees (see our article on the SBR process)

All practitioner fees are paid from company assets before unsecured creditors receive anything.

What Happens to Employees, Contracts, and Leases

In voluntary administration: employee contracts continue unless the administrator terminates them. The administrator has the option to keep staff on and continue trading — this is common where the business is being sold as a going concern or a DOCA is being negotiated. Leases and contracts generally continue but the administrator reviews each carefully.

In liquidation: all employee contracts are terminated. The company ceases to trade (in most cases). Leases are typically disclaimed. Ongoing contracts with customers and suppliers cease. The liquidator's focus is asset realisation, not business continuation.

The Decision Tree: Which One Do You Need?

A simplified framework:

Is the business viable? — i.e. does it make money in the long run, and is the current problem solvable (too much debt, a bad contract, a difficult period)? If yes: VA is worth exploring
Are total debts under $1 million? If yes, and the business is viable, the Small Business Restructuring process may be faster and cheaper than VA
Is the business not viable? — the core operations don't generate enough to sustain the company, even debt-free? If yes: CVL is the right answer. The sooner it's initiated, the more control directors have over the process and the smaller the potential insolvent trading exposure

True Tally: Clean books before any insolvency process

Every insolvency process starts with the books. An administrator or liquidator will review your financial records in detail — the more accurate and current they are, the faster and less expensive the process. Talk to us about getting your accounts in order.

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