The Right Tool for the Right Job – When Is Voluntary Administration the Smarter Move

When a business is in financial distress, choosing the right restructuring path can make all the difference between recovery and closure. Small Business Restructures (SBRs) have grown rapidly in popularity, while traditional Voluntary Administration (VA) appears to be declining. But that doesn’t mean VA is obsolete – far from it. The key is understanding when each tool is appropriate, and how to help clients navigate this choice.

Let’s start with why SBRs are becoming the go-to option for many businesses.

SBRs were specifically designed for small businesses. They’re fast, cost-effective, and crucially, allow directors to stay in control throughout the process. Unlike VA, there’s no need to hand over the reins i.e. directors can continue operating the company while working through the restructure.

That control, combined with a significantly lower cost – usually between $15,000 and $20,000 versus $60,000 to $120,000 for a VA, has made SBRs an attractive option. Add to that a high success rate, and it’s easy to see why they’re being widely embraced.

But SBRs aren’t always an option. And they’re not always the right fit.

VAs have earned a reputation for being expensive and disempowering as directors lose control, and if creditors reject the Deed of Company Arrangement (DOCA), liquidation is almost inevitable. In FY2024, 80% of companies that went into VA ended up in liquidation.

Despite that, VA still plays a crucial role in certain circumstances.

At de Jonge Read, we continue to recommend Voluntary Administration in complex, high-stakes situations where SBRs simply don’t fit. This includes cases where:

• The business doesn’t meet SBR eligibility criteria, this includes any company with liabilities over $1 million.
• Creditor arrangements are more complex, and a deeper more significant restructure is required.
• There are governance or trust issues, and creditors need assurance that independent oversight is in place.
• Voting dynamics matter, and related-party creditors may influence outcomes — something not possible under SBR.

In short, VA is still a powerful tool, when used strategically.

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What’s often overlooked is that VA can be tailored to reduce its downsides. At de Jonge Read, we help clients plan their way through VA to improve the chances of a successful outcome. That may include:

• Establishing a management or licence agreement before appointing an administrator. This arrangement can allow directors to continue managing operations under a third party, easing the disruption and significantly cutting costs.
• Using a creditors’ trust to replace the DOCA. This approach removes the ongoing “subject to DOCA” label, avoiding the stigma and limitations that might otherwise impact the business’s recovery and reputation.

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Quick Comparison: SBR vs VA

Ultimately, the right choice depends on the client’s size, structure, liabilities, creditor relationships, and goals. That’s why expert advice is essential— speak to the de Jonge Read team to assess your client’s situation and determine the most effective path forward.

We’ve had remarkable success helping clients navigate both SBRs and VAs. And while the national VA success rate in FY 2024 was only 20%, our 2024 success rate in getting VA proposals to DOCA accepted by creditors was 100%.

That result isn’t luck. It’s the product of careful planning, strategic execution, and deep experience in restructuring gained over the last twenty years.

If you have a client facing financial pressure, don’t let them go it alone or wait too long. Early advice can preserve options, protect value, and open the door to recovery.

Need to know which path is right for your client — SBR or VA? Get in touch with the de Jonge Read team today. We’ll help you assess the best option and guide your client through the process with clarity and confidence.

Should you have clients or associates that you know are struggling with financial issues or need assistance in reviewing their business affairs in preparation for what’s around the corner, our team of Strategists would be pleased to discuss options that are available on how to best design and implement insolvency strategies. Contact us now on p. 1300 765 080 | ua.mo1750265596c.arj1750265596d@ofn1750265596i1750265596

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