The appointment of a voluntary administrator by unsecured creditors : a case for the introduction of such a right

Insolvency practice, has in recent years undergone many changes with the introduction of the Voluntary Administration scheme under Part 5.3A of the Corporations Law. So significant are these changes that current statistics show that as much as 48 % of all external appointments over "insolvent" companies are by the appointment of a Voluntary Administrator. The scheme fails to allow the largest class of creditor, the unsecured creditor, the right to initiate the appointment of an Administrator over an insolvent company in order to protect their interests. This study aims to identify the rationale behind the exclusion of such a right, the cost/benefit of introducing the right to unsecured creditors and the possible social and economic consequences of including such a right into Part 5.3A of the Corporations Law. It is concluded that whilst the Voluntary Administration scheme continues to operate in the manner that it does, overall returns to creditors will not increase unless unsecured creditors are given the right to initiate the appointment of an Administrator. Extensions to the existing appointment process are suggested and reviewed