Show me the money! Courts want funding, not vibes

A company is facing a winding up application. The hearing date is approaching. Days before the hearing, voluntary administrators are appointed and the Court is asked to adjourn. For years, that strategy often bought time. Increasingly, it does not.

Voluntary administration is a mechanism designed to provide financially distressed companies with breathing space to restructure or reach a compromise with creditors. However, Courts have recently emphasised that the success of such applications hinges on the evidence of funding in determining the outcome of voluntary administration and winding-up applications.

We recently advised in proceedings where voluntary administrators were appointed shortly before a winding up hearing and an adjournment was sought under ss 440A(2) and 467 of the Corporations Act 2001 (Cth). The outcome reflected a broader judicial trend that practitioners on all sides of these disputes need to understand. 

Courts are no longer asking whether a restructuring is possible. They are asking whether it is real – and where, precisely, the money is coming from.

The framework

Section 440A(2) requires the Court to adjourn a winding up application if satisfied that it is in the interests of creditors for the company to continue under administration rather than be wound up. The provision does not operate automatically on appointment. The Court must be affirmatively satisfied, on evidence, that administration is likely to produce a superior outcome for creditors.

Section 467(1) separately confers a broad discretionary power to adjourn. Administrators typically seek relief under both. But recent authorities suggest courts are increasingly reluctant to exercise even that broader discretion where the restructuring proposal remains speculative or undeveloped.

From possibility to proof

The foundational test comes from Creevey v Deputy Commissioner of Taxation (1996) 19 ACSR 456, where the Queensland Court of Appeal held that satisfying s 440A(2) requires persuasive evidence that assets realised under administration, rather than liquidation, would produce a larger or accelerated dividend for creditors. In Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296, Brereton J sharpened this: the Court must be satisfied that administration is in the interests of creditors, not merely that it may be so.

That distinction has hardened across a consistent line of authority:

• T-S Capital Partners LLC v Paltar Petroleum Ltd [2019] FCA 635 – Administrators were appointed a fortnight before the final hearing. Stewart J dismissed both the s 440A(2) and s 467 applications, finding the administrators' hope amounted to nothing more than a "remote possibility" rather than a “real” one, and was clouded by the contingencies that had to fall into place before creditors could benefit.

• Re Australian Tailings Group Pty Ltd [2020] NSWSC 1543 – The adjournment was refused where the administrator's evidence rested on unverified assertions from the director. Black J held that where an administrator is appointed so late as to have no real understanding of a company's affairs, "a winding-up will less readily be adjourned and an administration less readily extended, because the Court will less likely be satisfied that it is in fact in the interests of the company's creditors for the company to continue under voluntary administration."

• Integrated Green Energy Solutions Ltd (admins apptd) [2021] NSWSC 620 – Administrators were appointed on the eve of the hearing. The Deed of Company Arrangement (DOCA) proposal depended primarily on a lender who had failed, repeatedly and over nearly four years, to provide funds it had repeatedly promised were imminent. Williams J found the director's intentions incoherent and undeveloped – noting that despite having had significant time to formulate a coherent proposal, the director had failed to describe any DOCA in anything "other than very broad terms."

• Re Brew Still Pty Ltd (admin apptd) [2023] NSWSC 256 – Administrators were appointed three days before the hearing with proposed funding that had already expired and a deed proposal the administrator had not substantively reviewed. Black J declined the adjournment, finding "no more reason to think that that course will be advantageous than that it will be disadvantageous to creditors."

Across these cases, courts drew a consistent distinction: a genuine restructuring process already underway is treated differently from a request for time in the hope that one may later emerge. The latter does not satisfy the test.

The practical message

Show the Court the money. Not a proposal to obtain funding. Not a discussion with investors. Not an aspiration to formulate a DOCA. Evidence – verified, immediate and commercially coherent – that creditors are likely to be better served by continuing administration than by winding up now.

For administrators: independently verify restructuring assumptions before going to court; identify executable (not indicative) funding; prepare a comparative liquidation analysis; and avoid leading unverified director material.

For directors: the later the appointment, the harder the evidentiary task. Waiting until days before the hearing is not a strategy – it is a liability.

For creditors opposing adjournment: focus on speculative funding, unverified asset values, incomplete investigations, and the cost erosion that continued administration imposes on the very creditors the regime is meant to protect.

Voluntary administration remains a powerful restructuring tool. But the courts are clear: it is not a procedural holding position. The question is always the same commercial one – show us the money.

Please reach out to our team of experienced legal insolvency experts at Bartier Perry to see how we can assist you in navigating the complexities of insolvency law.

Authors: Adam Cutri, Garrett Williams and Rezwan Attai

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.