Finding yourself in a situation where you’re dealing with voluntary administration isn’t exactly something you dreamed about when you started your business. But when it happens, it means your company is under serious financial stress.
On paper, voluntary administration sounds straightforward: appoint an independent administrator to take control, assess the company’s future, and decide whether to save it, restructure it, or wind it down. But here’s the thing—while that’s the official process, the reality is full of traps you probably don’t see coming until it’s too late. Legal traps. Financial traps. Even traps in how you communicate with stakeholders.
Having a lawyer in your corner isn’t a luxury here; it’s a necessity. A good lawyer won’t just handle the paperwork. They’ll keep you from making moves that could land you in even bigger trouble. And when it comes to voluntary administration, there are three major legal risks a voluntary administration services lawyer can help you avoid.
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Personal Liability You Didn’t See Coming
A lot of business owners assume that once voluntary administration starts, they’re personally off the hook for whatever’s happened in the business. That’s… not entirely true. In fact, one of the most overlooked dangers is the risk of personal liability—especially for directors.
Here’s the thing: just because you’ve handed control to an administrator doesn’t mean your past decisions are erased. If you’ve traded while insolvent (basically, continuing to rack up debts when you knew the business couldn’t pay them), creditors can come after you personally. And even after the administrator steps in, there are still certain responsibilities on your shoulders—like providing accurate information, handing over books and records, and cooperating fully. Slip up on any of that, and you could be looking at civil penalties or even criminal charges.
A lawyer will make sure you understand exactly where your personal exposure begins and ends. They’ll review your actions leading up to administration, advise you on what to disclose, and help you avoid saying or doing something that could make things worse.
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Breaching Contracts Without Realising It
One of the messiest parts of voluntary administration is figuring out what happens to your existing contracts. Suppliers, landlords, service providers all have agreements with you, and those agreements usually have clauses about insolvency or administration. Sometimes, those clauses let the other party terminate the contract immediately. Sometimes they don’t. And sometimes, the law overrides the contract entirely.
If you start cancelling services, refusing deliveries, or trying to renegotiate terms without legal guidance, you could accidentally breach a contract. That’s not just bad for your reputation—it can trigger lawsuits or claims for damages. And the last thing you need during administration is more claims against the company.
A lawyer will go through your contracts one by one, explain which ones are still enforceable, and negotiate on your behalf. They can also help you take advantage of recent insolvency law reforms that prevent some contracts from being terminated just because you’re in administration. Without that advice, you might let go of a critical supply agreement you actually could have kept.
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Mishandling Employee Entitlements
Employees are often the silent victims in voluntary administration. They’re worried about their jobs, their unpaid wages, and their leave entitlements. And while administrators are responsible for paying employee claims before most other unsecured debts, the details of who gets what, and when, can be complex.
If you, as a director, mishandle communication with employees or make promises you can’t legally keep, you could be setting yourself up for disputes. Imagine telling your team they’ll get paid “in full” after the administration wraps up, only to find out the funds just aren’t there. That’s a recipe for legal headaches.
A lawyer helps you navigate this with clarity. They’ll advise you on what you can say, how to communicate changes, and what obligations you have under employment law. They’ll also ensure you comply with redundancy, notice, and superannuation requirements. Without that, you risk not only angry staff but also action from regulators like the Fair Work Ombudsman.
The Bottom Line
Voluntary administration is already a high-stakes process. You’re not expected to know all the ins and outs of insolvency law. That’s why bringing in a lawyer early, before you make any major decisions, can save you from costly mistakes. If you’re facing this situation, don’t try to go it alone.
Robert Stewart is a seasoned law blog writer with a passion for translating complex legal concepts into accessible, informative content. With a keen eye for detail and a knack for storytelling, Robert crafts engaging articles that educate and empower readers in the realm of law.
Drawing upon his extensive experience in the legal field, Robert brings a wealth of knowledge to his writing, covering a diverse range of topics including personal injury, family law, criminal defense, and more. His articles combine thorough research with clear, concise language, making them valuable resources for both legal professionals and laypeople alike.