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.