When a company is staring down the barrel of a winding-up application, directors (and their advisors) sometimes scramble to appoint a voluntary administrator just days before the Court hearing. It’s a move known as the “11th-hour appointment” – part strategy, part prayer!
While technically valid, Courts are increasingly wise to such tactics. If you are going to pull the Voluntary Administration (VA) ripcord at the last second, you had better pack more than optimism into your parachute. You will need a funded proposal, a plan creditors can get behind, and a story the Court/Judge is actually going to believe.
We recently were successful with obtaining an 11th hour adjournment pursuant to section 440A(2) of the Corporations Act 2001. Below is an insight into how we achieved the adjournment.
The Legal Test – More Than Just Hope and a Spreadsheet:
Section 440A(2) says the Court must adjourn a winding-up hearing if:
“…the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than be wound up.”
This is a powerful section – but it is not a free pass!
The Court still must be persuaded and not just politely asked. That persuasion requires real evidence, not vague intentions or “we’ll get back to you.”
So what did the Judge actually seek:
In our recent case, the Federal Court was asked to adjourn the winding-up application to give administrators time to put forward a proposal for a Deed of Company Arrangement (DOCA). Whilst the Judge agreed, there were also a few caveats attached.
1. Short Adjournment = More Tolerance
Firstly, we were not requesting a six-month adjournment. We sought a short-term adjournment until to a few days after the second creditors’ meeting.
This reflects earlier cases like DCT v Grand Platinum Pty Ltd [2024] FCA 568, where Yates J confirmed that short, bounded adjournments are more likely to be accepted, e-pecially early in an administration.
2. We had completed a lot of work since our appointment
Despite being appointed just seven days before the hearing, we had:
- Investigated the company’s affairs;
- Issued the initial notice to creditors;
- Identified the company’s only real asset (a litigation claim); and
- Secured $60,000 in indemnity funding, with more to come.
Contrast this with Re Australian Tailings Group Pty Ltd [2020] NSWSC 1543, where Black J warned that if an administrator has no idea what was going on, they should not expect much sympathy from the Court.
3. The DOCA had real commercial substance
The DOCA included:
- A $300,000 deed fund for unrelated creditors (paid over 12 months); and
- A waiver of participation by related creditors (owed over $28 million).
The only alternative asset was a contingent litigation claim. Without the DOCA, a liquidation would likely return nil. Under the DOCA, creditors were looking at around 10 cents in the dollar.
In Deputy Commissioner of Taxation v Helico Pty Ltd (Admin Apptd) [2012] FCA 1155, Collier J accepted an adjournment where the proposed DOCA offered better returns than liquidation, particularly where the only alternative asset was also contingent.
4. The ATO did not object
The largest unrelated creditor – the ATO – did not oppose the adjournment. That is no small thing. When the taxman goes quiet, you pay attention.
Compare that to DCT v KJ Consulting Pty Ltd (Administrators Appointed) [2005] FCA 1827, where Gyles J denied an adjournment partly because the ATO opposed it and the administrator was too reliant on untested information from directors.
5. Let the creditors decide – That is the whole point
The Judge leaned heavily on the legislative purpose of Part 5.3A: creditors should decide a company’s fate, not the Court, and not a creditor holding less than 1% of the debt.
As the High Court put it in Mighty River International Ltd v Hughes (2018) 265 CLR 480: the regime relies on commercial decision-making by creditors, not judicial paternalism.
A Cautionary Tale for Directors, Advisors, and Petitioning Creditors
For advisors assisting directors or petitioning creditors, this case is a timely reminder:
- Evidence matters – Administrators need to show substance, not intention.
- Funding counts – An indemnity or upfront contribution makes a big difference.
- Timing is everything – Late appointments are viewed with suspicion (and rightly so) unless promptly followed by real activity.
- Creditors carry weight – The views of unrelated creditors, particularly the ATO, are highly persuasive.
- DOCA or delay? – The Court is more likely to adjourn if the DOCA is not just a smokescreen to avoid scrutiny.
And most importantly: if your client’s DOCA relies on the votes of related parties and the administrator’s casting vote, expect the Court to ask questions.
A Final Thought
An 11th-hour appointment can be a clever move — but only if it is part of a plan, not a panic. Think of it like a parachute: it works best when packed properly, deployed with care, and not thrown out of the plane after impact.
For professional advice on how to make a VA appointment work – and more importantly, stick – contact SV Partners. We do this every day, preferably before the flames reach the cockpit.
Article by Frank O’Neill (Director) – Mackay