What Is the Role of an Administrator?

Appointing an administrator is associated with processes that resolve a company’s affairs when it is experiencing financial problems or is otherwise insolvent. Insolvency refers to when a company cannot pay its debts when they are due. These processes generally include:

• administration;
• receivership; and
• liquidation.

This article will explain the process of appointing an administrator when a company enters into administration. It will also explain the administrator’s powers to sort through company affairs.

How Administrators Are Appointed

Suppose your company is under financial distress and unable to pay its debts when they fall due. In that case, you may look into appointing an administrator to your company to assist you in working through an otherwise difficult and stressful situation.

Any administrator you appoint to your company must be a registered liquidator, and you may appoint more than one administrator. Once appointed, your company’s administrator will act as your company’s agent when they perform a function or exercises power as an administrator.

Provided that your company is not already under administration, an administrator can be appointed in writing. While your board of directors may appoint an administrator if they resolve that the company is or will become insolvent in the future, an administrator may also be appointed to your company by:

• a liquidator of a company: if they think that the company is insolvent or is likely to become insolvent. However, the liquidator will not be able to appoint him or herself as the administrator of a company; or
• a secured party of your company: being a person who is entitled to enforce a security interest in the whole, or substantially the whole, of your company’s property, where such security interest has become and remains enforceable. 

The Court may also appoint an administrator to your company where:

• a company is already under administration, but no administrator is acting for some reason. Here, either ASIC, an officer, member or creditor of your company makes an application to the Court for such appointment; or
• the Court makes inquiries and conducts certain investigations into your company’s external administration.

Ending an Administrator’s Appointment

Once appointed as an administrator of your company, you cannot revoke the appointment. However, the administrator’s appointment may end where the administrator:

• dies;
• becomes prohibited from acting as an administrator of a company; or
• resigns by notice in writing given to their appointer and the company. In these circumstances, the party appointed the outgoing administrator may appoint a new administrator of the company.

An administrator’s appointment will also end:

• once the administration of the company comes to an end;
• a liquidator is appointed to the company; or
• the company is wound up. 

What Are an Administrator’s Powers?

An administrator will take full control of your company and has powers to undertake a series of investigations to attempt to resolve its future and to see if there is a possible way to save your company or its business. For this reason, an administrator has broad powers and specific duties at law while your company is under administration. Specifically, an administrator has the following powers:

Investigations and Reports Administrators

During their investigation, an administrator may find that a past or present officer, employee or member of your company may have been guilty of an offence in relation to your company. This could include allowing the company to trade while insolvent. They might also find that a person who has taken part in the formation, promotion, administration, management or winding up of your company may have:

• misapplied, retained, or may have become liable or accountable for money or property (in Australia or elsewhere) of the company; or
• been guilty of negligence, default, breach of duty or breach of trust in relation to your company;

In these circumstances, the administrator must:

• lodge a report with ASIC about the matter as soon as practicable; and
• give ASIC such information, and such access to and facilities for inspecting and obtaining copies of documents, as ASIC requires.

ASIC will then make a decision on whether or not any further actions should be taken against those persons, the subject of the administrator’s report. 

Key Takeaways

Administrators are appointed to financially distressed companies to help them find a way forward and are given broad and extensive powers to undertake their often-extensive duties. If your company is in financial distress and would like to discuss your options, including whether or not an administrator should be appointed to your business, contact LegalVision’s insolvency lawyers on 1300 544 755 or fill out the form on this page.