For more than three decades, Voluntary Administration (VA) has been the centrepiece of Australia’s corporate rescue framework – a mechanism designed to give viable businesses breathing space, protect enterprise value, and maximise returns for creditors. Yet despite its good intentions, VA now faces an identity crisis – misunderstood by directors, viewed suspiciously by creditors, and increasingly overshadowed by alternative restructuring tools.
The result? A regime conceived as a lifeline is too often perceived as a last resort. In practice, VA remains a proven and effective restructuring mechanism when used early and applied with clarity, structure and commercial discipline.
Myth #1: “VA means my business has failed”
For many directors and business owners, VA feels synonymous with failure. The industry has done little to shift this narrative: high-profile collapses and media language such as “administrators called in” reinforce the perception that VA is merely a gateway to liquidation.
Reality: VA is a restructuring tool, not a failure. Many successful companies have used administration to emerge stronger. It’s proactive crisis management, not surrender. At its core, the VA regime aims to:
- provide breathing space from creditor pressure,
- allow independent assessment of viability, and
- deliver a binding restructuring plan via a Deed of Company Arrangement (DOCA).
In practice, many companies enter VA too late, often when cash is exhausted and stakeholder trust in broken. This creates a self-fulfilling prophecy. Olvera Principal Rajiv Goyal explains that “poor timing leads to poor outcomes”, which then reinforces the myth that “VA never works.”
Myth #2: “I’ll lose everything – my business, my assets, my reputation”
Many directors believe that entering VA means total personal and professional ruin. It’s one of the most persistent and paralysing myths – often causing businesses to delay action until it’s too late.
Reality: VA is designed to preserve value, not destroy it. It creates a controlled environment for restructuring, stabilisation and negotiation.
Here’s what directors often don’t realise:
- You do not automatically lose your personal assets.
- Your business can continue trading under supervision.
- Your reputation is often strengthened, not damaged.
- VA is not liquidation – it’s designed for recovery, not closure.
As Olvera Principal Neil Cussen observes: “Stakeholders increasingly view VA as a responsible step – a sign the directors are taking action to protect value, not walking away from it.”
Clear communication and a structured process often build confidence rather than erode it.
Myth #3: “Creditors will never agree to it”
For many directors, one of the biggest fears around VA is the belief that creditors will automatically reject any proposal. But this assumption is outdated.
Reality: Creditors are commercially driven. They support proposals that deliver better outcomes than liquidation, which well-structured DOCAs regularly do. Most creditors:
- want the company to survive,
- want the highest dividend, and
- trust the administrator’s independent advice.
The VA process provides information, transparency and structure that creditors generally welcome, particularly when proposals are realistic, timely and commercially grounded.
Myth #4: “VA is only for big companies”
Many Small and Medium Enterprises (SMEs) assume that VA is only for large corporates with complex structures. This misconception often prevents smaller businesses from seeking help early.
Reality: VA is accessible and effective for businesses of all sizes – and SMEs often benefit most. SMEs:
- experience creditor pressure more intensely,
- can implement change more quickly,
- often have simpler operations, and
- can return to profitability faster under a DOCA.
Some of the most successful VA outcomes occur in the SME sector, where agility and fast decision-making support effective restructuring. VA offers tools that smaller companies can’t access elsewhere – including creditor protection, a binding framework for negotiation, and relief from insolvent-trading exposure.
When used early, VA can transform the trajectory of a distressed SME, preserving jobs, relationships and enterprise value.
Conclusion
Voluntary Administration is not broken. It is misunderstood.
When used proactively and at the right time, VA remains one of Australia’s most effective mechanisms for stabilising distressed businesses, protecting jobs and delivering fair outcomes for creditors.
The key driver of success is not promotion or perception – it is timing, transparency and the willingness of directors to act decisively before options evaporate.
To restore its reputation, the industry must challenge outdated narratives and reinforce what VA truly represents: a structured, legally supported pathway to recovery – not a predetermined path to collapse.
At Olvera, we see this every day. With eight Principals and a 45 strong team, we are one of Australia’s leading restructuring, turnaround and insolvency firms – built to guide businesses through uncertainty with clarity, discipline and commercial realism. Our multidisciplinary approach means we don’t just administer VA processes; we help boards stabilise, restructure and rebuild with confidence.
If the industry wants VA to reclaim its intended purpose, it starts with capability, leadership and early engagement, and that’s exactly what we’re committed to delivering.
