Caught in financial distress and not sure whether to shut down or restructure? Many Australian business owners feel overwhelmed when confronted with unfamiliar terms like company liquidation or voluntary administration. The pressure to act quickly often collides with a lack of clarity about what each process actually means.
At SALEA Advisory, we often see how uncertainty around industry terms can heighten stress and delay critical decisions for our clients. We’re here to simplify insolvency and help business owners and advisers navigate these decisions. This article demystifies company liquidation and voluntary administration, giving you the confidence to take the next step toward stability.
What Does It Mean to Go Into Administration or Liquidation?
When a business can no longer pay its debts on time, it may be considered insolvent. Two formal processes become relevant when a company is insolvent in Australia: voluntary administration and company liquidation.
Although these terms are sometimes used interchangeably, they involve very different outcomes and should be understood clearly.
What is Voluntary Administration?
Voluntary administration (VA) is the process that allows an insolvent company to explore options to save the business or achieve a better return for creditors than an immediate liquidation.
A registered insolvency practitioner is appointed as the voluntary administrator to take control of the company and assess its financial position. The administrator works quickly (typically within 25 business days) to propose one of three outcomes:
- The company returns to the directors’ control
- The company executes a Deed of Company Arrangement (DOCA) to repay creditors under new terms
- The company proceeds to liquidation
VA is often used by directors who believe the core business remains viable but needs breathing room from creditors and expert guidance to restructure.
A recent high-profile example of voluntary administration is Mosaic Brands, which entered the process in late 2023 with debts nearing $250 million. The company continued trading under administration while exploring a company restructure — providing a real-world example of how VA can be used to provide a business with the time needed to repay its debts.
What Happens When a Company Goes Into Liquidation in Australia?
Company liquidation is the process of winding up a business and ending its operations. A liquidator is appointed to sell the company’s assets, investigate its affairs, and distribute any funds to creditors in a legally prescribed order.
Liquidation can be:
- Voluntary (initiated by shareholders or directors)
- Court-ordered involuntary administration (usually following a creditor’s application)
Once liquidation begins, the company ceases trading, and directors lose control of the company. Employees may be terminated, with entitlements claimed through the government’s Fair Entitlements Guarantee (FEG) scheme.
Importantly, liquidation aims to finalise and dissolve a company’s affairs, whereas voluntary administration leaves room for recovery.
Key Differences Between Company Liquidation and Voluntary Administration
Feature | Voluntary Administration | Company Liquidation |
Goal | Rescue/restructure the business | Wind up and dissolve the business |
Appointee | Voluntary administrator | Liquidator |
Outcome | DOCA, liquidation, or return to directors | Company ceases to exist after winding up |
Director Role | Suspended | Removed entirely |
Creditor Involvement | Vote on DOCA proposal | Receive distributions from asset sales |
Employee Status | May remain employed | Usually terminated |
Which Option Is Right for Your Situation?
If your business is facing mounting debts, unpaid tax obligations, or creditor threats, it’s critical to assess viability early.
Voluntary administration might be the best course of action if your business has solid foundations but is under short-term pressure.
Company liquidation may be appropriate if the business can no longer recover or meet its obligations.
If handled promptly and correctly, both options can protect directors from further legal exposure — particularly for trading while insolvent or personal guarantees.
Why You Should Always Seek Expert Advice
Navigating insolvency is complex, but you don’t have to do it alone. Engaging insolvency experts as soon as issues arise gives you more control over the process and protects your interests.
At SALEA Advisory, our experienced team of insolvency practitioners will help you assess your financial position, understand your obligations, and identify the best path forward — whether through voluntary administration, company liquidation, or another option like small business restructuring.
Next Steps: Initiating Voluntary Administration or Company Liquidation
Understanding the difference between company liquidation and voluntary administration is key to making informed decisions during financial distress. By clarifying the purpose, process, and outcomes of both options, you can choose the right path for your business.
The problem we addressed is simple yet critical; confusion around the available options can delay action and worsen outcomes when facing insolvency.
Your next step is to seek expert guidance to determine if your business can be restructured or should be wound up, and to assess when appointing an administrator is necessary. The earlier you act, the more choices you’ll have.
At SALEA Advisory, we specialise in helping business owners and their advisers understand and manage insolvency processes. With decades of experience and a personal, tailored approach, our team provides the clarity and support you need.
For a deeper dive into the VA process, download our free Guide to Voluntary Administration and take the first step toward financial clarity and control.
