Options Available to an Administrator in Case of Insolvency of a Company

Running head: COMMERCIAL AND CORPORATE LAW
COMMERCIAL AND CORPORATE LAW
Name of the Student
Name of the University
Author Note

1COMMERCIAL AND CORPORATE LAW
Issue
Ravi owns a soil and water testing company known as Darwin Soil and Water Testing
Pty Ltd and is the sole shareholder and director of the company. The company reported a good
profit at the end of the first year and was seen as a safe venture. However in its second year its
largest contractor started to employ internal entities for their soil and water testing and this
caused a huge fall in the revenue of the company. Ravi felt that the company would soon become
insolvent and thus employed an administrator to manage the affairs of the company. The
administrator declared that the company owed a total of $210,000 (this included a debt a $90,000
to Ravi as the sole secured creditor) and had assets worth a total of $95,000. The issue here is to
determine the options available to the appointed administrator and the amount to be paid to the
unsecured creditors in case Ravi can recover his debt to the company.
Rule
Companies that undertake business activities within the jurisdiction of the Australia are
regulated by the provisions of the Companies Act, 2001. Part 5.3A of the Corporations Act, 2001
defines the administration process undertaken with the appointment of an administrator.
When a company is or will evidently become insolvent the company itself can appoint an
administrator for the affairs of the company. This is defined in Section 436A of the act1. Section
436C of the act states that a person who can legally claim a securities interest in the company can
appoint an administrator if the person feels that the company will evidently become insolvent2. It
is further provided in Section 436DA (2) of the act that an administrator appointed through such
1 Corporations Act, 2001.
2 Corporations Act, 2001.

2COMMERCIAL AND CORPORATE LAW
a process would have to make a declaration regarding the liabilities and indemnities of the
company at the time of commencement of such a process3. The administrator so appointed
assumes complete control over the affairs of the company and acts on behalf of the company as
defined in Section 437A of the act4. Section 436E of the act provides for the time and purpose of
the first creditors meeting which the administrator is tasked with holding5. The section states that
the person so appointed would have to hold the first meeting of the creditors where it would be
determined if a committee inspection needs to be appointed for the company and decides on the
composition of such a committee. The section also necessitates that such a meeting must be held
within 8 days from the appointment of such an administrator and the creditors must be given 5
days notice before the meeting is held.
When the administrator assumes complete control over the affairs of the company he may
sell properties related to the business or sell parts of the business or the company as a whole6.
Additionally, the administrator can enter into contracts on behalf of the company. After
commencement of the administration process the administrator so appointed is the individual
tasked with transacting on behalf of the company following the provisions of Section 437D of
the act7.
When an administrator is appointed for such a process the options available to him are
enumerated below8:
 The administrator may return the business of the company back into the hand of their
board of directors.
3 Corporations Act, 2001.
4 Corporations Act, 2001.
5 Corporations Act, 2001.
6 Hanrahan, Pamela F., Ian Ramsay, and Geofrey P. Stapledon. "Commercial applications of company law." (2013).
7 Corporations Act, 2001.
8 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.