Debts during special administration

When a corporation enters special administration, its existing debts (called pre-appointment debts) are put 'on hold'. This gives the corporation time to sort out its future with the help of a special administrator.

Read more about special administration.

Paying off debts

The process for paying off debts depends on when the corporation incurred them.

Old debts

Generally, creditors can’t recover pre-appointment debts during special administration. 

Creditors can’t apply to wind up the corporation unless the special administrator or the court permits it.

The special administrator will try to pay as many pre-appointment debts as possible during the special administration. 

If some debts are still unpaid when the special administration ends:

• the corporation becomes responsible for them again
• creditors can take action to recover what they’re owed.

New debts

The special administrator must pay any debts the corporation incurs during the special administration and the special administrator authorises. 
These might include:

• goods or services costs
• property leases
• loans. 

The special administrator is also responsible for certain tax liabilities. If the corporation doesn’t have enough money to pay these debts, the special administrator must cover them.

Using property

If a corporation uses a property, the special administrator has 5 business days from their appointment to inform the property owner if they’ll keep using it. 

The special administrator becomes liable for any rent or other amounts due after the 5-day period.

Claims against the corporation

If a creditor wants to make a claim or deal with the corporation property, they need written permission from the special administrator or the court for:

• unsecured creditors to start or continue their claims
• secured creditors to enforce their charges (with some exceptions)
• receivers and administrators appointed under the Corporations Act 2001 (voluntary administration) to exercise their powers.

Court permission is needed for:

• enforcing claims
• creditors to act on a personal guarantee from a company director or another person.