Receivership, voluntary administration and liquidation are commonly misunderstood in Australian insolvency. Directors often assume they mean roughly the same thing: a business in trouble, an outsider taking over, and the company is likely finished.
Each process starts for different reasons, is managed by different people, and leads to different results. Knowing which one applies helps you decide what to do next.
Receivership vs Administration vs Liquidation
If a receiver is appointed to your company, it is not the same as liquidation and does not mean that administration has started. Mixing up these terms can cause directors to act, or not act, based on the wrong ideas about their control and what might happen next.
What is Receivership?
Receivership starts when a secured creditor, usually a bank or lender, enforces its security interest. A receiver takes control of certain secured assets, collects them, and sells them to repay the debt owed to that creditor.
Directors remain in office, but their authority over the secured assets is limited while the receiver is in control. Once the secured debt is repaid and the receivership concludes, any remaining assets and control return to the directors, unless another external administrator has since been appointed.
What Does Voluntary Administration Mean?
Directors usually initiate voluntary administration when the company is insolvent or at risk of becoming insolvent. This process lets them review options and aims to achieve a better outcome for creditors than if the company were wound up immediately.
An administrator takes over the whole company. Creditors then vote on whether to accept a Deed of Company Arrangement (DOCA), return the company to its directors, or proceed with liquidation.
Read more about the legal implications for directors during voluntary administration.
What Happens When a Company Goes Into Liquidation?
Liquidation winds up the company permanently. A liquidator, appointed by the court, creditors or shareholders, takes full control, sells all assets, distributes proceeds according to legal priority, and the company is eventually deregistered. Directors lose all their powers, and the company ceases to trade.
How the Processes Interact and Differ
Receivership Can Run Alongside Other Processes
A company can be in receivership and administration at the same time, or in receivership and liquidation. This is because receivership only gives the receiver control over certain assets covered by the secured creditor’s interest. It does not change the company’s overall legal status or start administration or liquidation by itself.
Having a receiver appointed does not always mean the business’s fate is sealed.
How Unsecured Creditors Are Treated
When a receiver collects money from assets like stock, cash, or money owed by customers, there is a set order for paying entitlements. Wages and superannuation are paid first, followed by leave entitlements and then retrenchment pay. Each group is paid in full before moving to the next.
This differs from the Fair Entitlements Guarantee, which is the government’s safety net for unpaid employee entitlements. The guarantee applies only once a company goes into liquidation, not while it is in receivership.
Other unsecured creditors, like suppliers, are paid after secured creditors and employee entitlements. The receiver has no obligation to report to them on the progress of the receivership.
How We Help
SALEA Advisory acts as a receiver and manager on behalf of lenders and mortgagees, as a voluntary administrator, and as a liquidator. We help directors determine which process applies to them and what their options are. Our role is to give clear, practical advice for each situation.
If you have been contacted by a receiver, administrator, or liquidator, or if you are unsure what a recent notice means for your business, seek advice early before decisions are made for you.
