SECTIONS OF THE CORPORATIONS ACT YOU MAY HAVE MISSED: S 441A
Section 441A of the Corporations Act 2001 (Cth) plays a crucial role in balancing the rights of secured creditors and the objectives of voluntary administration. It applies where a secured party holds security over the whole or substantially the whole of a company’s property.
Once a company enters voluntary administration, the Act defines what’s known as the ‘decision period’ of 13 business days from either the commencement of the administration or the secured party’s receipt of written notice of the appointment. During this limited time window, the secured creditor must decide whether to:
Enforce its security, by appointing a receiver or taking possession of all property subject to security interest; or
Allow the administration to proceed, effectively placing the company’s fate in the hands of the administrator.
If the secured creditor does not act within the decision period, the statutory moratorium takes full effect, preventing enforcement of security without the administrator’s consent or court approval.
The purpose of s 441A is to stabilise the company’s position during administration while still protecting the interests of secured creditors. It prevents a race to enforcement and gives administrators breathing space to assess the company’s viability and potentially propose a Deed of Company Arrangement (DOCA).
In short, s 441A forces secured creditors to choose either to enforce quickly or cooperate with the administration. It is ultimately a key mechanism that underpins the balance between creditor rights and corporate rescue.