Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
Contents
If your business is under serious financial pressure, it can feel like you’re making decisions in the dark - balancing staff, suppliers, rent, tax, and day-to-day cashflow, while also trying to keep the doors open.
Voluntary administration in New Zealand is designed to give an insolvent (or likely insolvent) company a short “breathing space” while an independent insolvency practitioner takes control and works out whether the business can be saved, restructured, or needs to be wound up.
This guide explains how the voluntary administration process in New Zealand generally works, what happens to directors and creditors, what it can mean for contracts and employees, and what outcomes you can expect.
Note: This is general information only. Insolvency decisions are time-sensitive and fact-specific, so it’s worth getting tailored legal advice early.
What Is Voluntary Administration In New Zealand (And Why Does It Exist)?
Voluntary administration is a formal insolvency procedure under the Companies Act 1993 (Part 15A). It’s intended to:
- maximise the chances of the company (or its business) continuing; or
- if that’s not possible, achieve a better return to creditors than an immediate liquidation.
The key idea is that once an administrator is appointed, the administrator (not the directors) generally controls the company’s affairs for a short, structured period. During that time, there are statutory restrictions on certain enforcement steps and court proceedings against the company (often described as a moratorium), but the “pause” is not absolute and there are important exceptions - particularly around secured creditor rights and enforcement of security.
In plain terms: voluntary administration is meant to slow the financial free-fall long enough for a realistic plan to be put on the table.
Voluntary Administration vs Liquidation (A Quick Comparison)
- Voluntary administration is usually about assessing rescue or restructure options, and may restrict some creditor action for a limited period while options are considered.
- Liquidation is about winding the company up and distributing what’s left to creditors in an order set by law.
- Receivership is typically driven by a secured creditor enforcing security (often over specific assets), and can sometimes occur at the same time as other processes.
If you’re trying to choose the right path, it’s important to look at the company’s debts, assets, contracts, and whether there’s a viable business underneath the cashflow issues.
When Should You Consider Voluntary Administration?
Voluntary administration in New Zealand is generally considered when your company is insolvent, or likely to become insolvent - but there may still be a viable underlying business if debts can be compromised, timeframes extended, or operations restructured.
Common warning signs include:
- you can’t pay debts as they fall due (even if your business is “profitable on paper”);
- you’re consistently paying creditors late, on payment plans, or only when chased;
- rent and tax arrears are building up;
- there are statutory demands, court proceedings, or aggressive debt collection activity;
- your bank is applying pressure or threatening enforcement (especially if there’s a General Security Agreement in place);
- you’re considering taking on new credit just to pay old debts.
One of the biggest legal risks for directors is continuing to trade in a way that worsens creditor losses. If you’re worried about exposure as a director, it’s worth understanding your position around personal liability and getting advice quickly.
Can Any Company Use Voluntary Administration?
Not every situation is suitable. Voluntary administration is usually most useful when:
- there’s a “real business” worth saving (customers, contracts, staff capability, goodwill);
- the problem is timing/cashflow, a one-off shock, or debt load; and
- creditors may accept a compromise if it’s better than liquidation.
On the other hand, if the company has no viable business left, no funding, and no realistic restructure option, liquidation may be more appropriate.
How Does A Company Enter Voluntary Administration In New Zealand?
There are a few ways an administrator can be appointed in New Zealand. The most common is a director-led appointment where the board resolves that the company is insolvent or likely insolvent and should appoint an administrator.
Common Appointment Pathways
- Directors/board appointment: usually by a formal resolution of the board.
- Secured creditor appointment: in some cases, a secured creditor with security over the whole (or substantially the whole) of the company’s property can appoint an administrator (often under the terms of its security and subject to the Act).
- Court appointment: less common, but possible in certain circumstances.
From a governance perspective, it’s important that the company’s decision-making is properly documented. For example, companies often record key decisions using a Directors Resolution (tailored to the situation) and ensure their internal rules are followed under their Company Constitution (if they have one).
This is a step where “DIY” paperwork can create real problems later - especially if creditors, shareholders, or an insolvency practitioner challenges the validity of the appointment process.
What Should You Do Before Appointment (If You Still Have Time)?
If you’re still in the early stage of distress (before formal appointment), it helps to get your house in order. That usually means:
- pulling together current financials (cashflow, aged payables/receivables, bank statements, tax position);
- making a list of all secured creditors and security documents;
- identifying key contracts (leases, supply agreements, customer contracts, equipment hire);
- working out whether the business is viable with reduced debt or new funding.
It can also be useful to get legal input on any “deal” you’re considering with a major creditor or investor before the process starts (because certain transactions close to insolvency can later be challenged).
What Happens After An Administrator Is Appointed?
Once voluntary administration begins, the company’s day-to-day control typically shifts to the administrator. The purpose is to put an independent, qualified person in charge so they can act in the interests of creditors as a whole.
1) Control Shifts From Directors To The Administrator
Directors don’t automatically disappear - but they generally can’t manage the company in the usual way without the administrator’s involvement. The administrator will:
- take control of the company’s business, property, and affairs;
- review the company’s financial position and what led to distress;
- decide whether to keep trading, pause trading, or sell parts of the business; and
- communicate with creditors and call required meetings.
Directors usually still have obligations to cooperate, provide records, and answer questions. Practically, you should expect the administrator to request information quickly - and delays can reduce the options available.
2) A “Breathing Space” For The Company (Moratorium)
Voluntary administration typically creates restrictions on many steps against the company unless the administrator consents or the court gives permission. Depending on the circumstances, this may affect:
- starting or continuing certain court proceedings;
- enforcing judgments; and
- some enforcement action by creditors.
However, the moratorium has limits and exceptions. In particular, secured creditors may still be able to enforce security in certain situations (including where the law provides a decision window and/or where enforcement was already underway), and some rights can continue to be exercised despite administration. Because the scope can be technical, it’s worth getting advice early on what actions are actually restrained in your case.
This breathing space is often the biggest practical benefit - it can reduce the “pile on” effect where multiple creditors take steps at once, leaving the business with no room to restructure.
3) Secured Creditors Still Matter (A Lot)
If your company has a lender with security over substantially all assets (often through a GSA), that secured creditor’s rights are a major factor in whether the business can be saved.
In many cases, you can’t realistically restructure without engaging that secured creditor early - because their position may determine whether the business can keep trading, access working capital, or sell assets as part of a plan. Importantly, administration does not necessarily prevent a secured creditor from enforcing its security, and the timing and nature of enforcement rights can be outcome-determinative.
4) Creditors Are Notified And Meetings Are Held
Voluntary administration is a structured process with creditor involvement. While the exact mechanics and timing can vary, you can generally expect:
- a first creditor meeting (often procedural, including whether to replace or confirm the administrator);
- the administrator’s investigation and report; and
- a key decision meeting where creditors vote on the company’s future (for example, whether to enter a deed of company arrangement or go into liquidation).
If you’re a director, don’t assume you can “sell” a plan without evidence. Creditors usually want clear numbers, realistic forecasts, and proof the proposal is better than liquidation.
What Does Voluntary Administration Mean For Your Contracts, Lease, Staff, And Customers?
This is usually the most stressful part for business owners - because even if the company is in administration, the business still has people to pay, stock to order, and customers to serve.
What happens will depend on the administrator’s strategy and the terms of each agreement, but here are the usual pressure points.
Commercial Leases And Premises
If your company operates from leased premises, the lease is often one of the biggest liabilities - and also one of the biggest assets (because you may need that location to keep trading).
An administrator will typically assess:
- whether the business can keep paying rent during administration;
- whether the lease can be renegotiated; and
- whether the business (or lease) can be sold or transferred.
It’s common for landlords to want clarity quickly. If you’re dealing with a lease, the precise wording of your Commercial Lease Agreement matters - especially around default, termination rights, and assignment.
If the plan involves selling the business, you may also need to deal with assigning a lease as part of the transaction.
Employees And Wages
If your company has employees, you’ll want to think about:
- whether staff will continue working during administration;
- whether wages will be paid on time (and from what funds);
- whether redundancies are likely if the business can’t continue in its current form; and
- what employment documents say about termination, notice, and entitlements.
Employees’ legal rights don’t disappear because a company is in administration. Having clear, up-to-date Employment Contract terms can make it much easier to manage process and expectations if changes are needed quickly.
Because employment decisions in insolvency can become high-risk (both legally and reputationally), it’s smart to get advice before making changes to roles, hours, or pay arrangements.
Supplier Agreements And Trading Terms
Suppliers may:
- place the company on stop-credit or COD terms;
- enforce retention of title clauses (if they exist and are properly documented);
- terminate supply agreements based on insolvency clauses (depending on the contract terms and any limits under insolvency law).
The administrator will often prioritise “critical suppliers” to keep the business operating, but you should expect tighter trading terms.
Customers, Deposits, And Consumer Issues
If you’re customer-facing (retail, eCommerce, services), you’ll need to manage trust and expectations carefully. Customers may ask:
- Will you still deliver?
- Are deposits safe?
- Will warranties be honoured?
Depending on your business model, your obligations under consumer law may still be relevant, including the Fair Trading Act 1986 (misleading conduct) and Consumer Guarantees Act 1993 (consumer rights). What you can promise customers during administration needs to match what the business can actually deliver.
What Are The Possible Outcomes Of Voluntary Administration In New Zealand?
Voluntary administration isn’t an end point - it’s a process that leads to one of a few defined outcomes.
1) Deed Of Company Arrangement (DOCA)
A common outcome is a deed of company arrangement (often shortened to “DOCA”). This is a binding compromise with creditors that may include things like:
- creditors agreeing to accept less than the full debt (a haircut);
- a structured repayment plan over time;
- sale of some assets to fund a payout;
- new investment or refinancing; or
- restructuring operations to return the business to profitability.
If your plan involves settlement-style terms with one or more parties (for example, resolving disputes while the company restructures), you may also end up documenting aspects separately as a Deed of Settlement - but it needs to fit properly with the insolvency strategy.
DOCAs can be powerful, but they only work if they’re realistic. If the company can’t meet the deed terms, you can end up in liquidation anyway - just later (and with additional costs).
2) Return Of Control To Directors
In some cases, creditors may decide the company should be returned to directors (for example, if the administrator’s report shows the company is actually solvent, or a short-term problem has been resolved).
This is less common where there is significant creditor pressure, but it can happen.
3) Liquidation
If there’s no viable restructure plan, creditors may vote for liquidation.
Liquidation generally means the company stops trading (unless trading briefly helps preserve value), assets are sold, and proceeds are distributed to creditors according to legal priorities.
If you’re trying to preserve value for a sale (like selling the business as a going concern), it’s important to handle contracts, IP, and transaction documents carefully. For example, if a buyer is looking at an asset purchase, the legal structure and paperwork needs to match what’s actually being sold - and this is where an Asset Sale Agreement becomes critical.
4) Sale Of Business Or Assets During Administration
Sometimes, the best result is selling the business (or parts of it) while it still has goodwill. This can preserve jobs and deliver a better return to creditors than liquidation.
If a sale is on the table, the administrator will typically look for:
- clean deal structure (what is included/excluded);
- clarity on employee transfers (if any);
- assignment/novation of key contracts; and
- proper handling of licences, IP, and customer data.
This is also where “quick” handshake deals can backfire. A properly documented transaction is what protects everyone’s position and reduces later disputes.
Key Takeaways
- Voluntary administration in New Zealand is a formal Companies Act process designed to give an insolvent (or likely insolvent) company breathing space to restructure or achieve a better result for creditors than immediate liquidation.
- Once an administrator is appointed, control typically shifts from directors to the administrator, and certain creditor enforcement actions are restricted while options are assessed - but the restrictions aren’t absolute and secured creditor rights can be critical.
- Secured creditors (especially those holding security over substantially all assets) often have a major influence on whether a restructure is possible and whether the business can keep trading.
- Your lease, supplier terms, customer commitments, and employment obligations don’t disappear during administration - they need to be managed carefully and often quickly.
- The most common outcomes are a deed of company arrangement (a compromise with creditors), liquidation, or (less commonly) returning control to directors.
- If you think voluntary administration might be on the horizon, getting advice early can help you protect value, reduce director risk, and keep more options available.
If you’d like help understanding voluntary administration in New Zealand, your director obligations, or your options for restructuring or closing down properly, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat. (Note: administrators are independent insolvency practitioners; Sprintlaw can support you with legal advice and documentation alongside the administration process.)
