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Abstract

[extract] Unfortunately, it is the precise features that make the voluntary administration procedure so attractive to insolvent companies that also make the procedure susceptible to abuse of the kind that is the subject of this article. The procedure is quick, efficient, relatively inexpensive and, most importantly, largely free from judicial interference. However, there are some recent cases which demonstrate the potential for the procedure to be employed in circumstances where insolvency is dubious, merely as a means of short-circuiting the ordinary safeguards applicable in cases of corporate reorganisation. In other words, some companies are taking advantage of the relative informality of the procedure to achieve corporate governance reform, rather than salvage companies teetering on the edge of liquidation.. Indeed, the prospect of this development was signalled with some prescience by Justice Austin in a thoughtful paper published last year. His Honour was writing on the subject of administrators as fiduciaries, but his observations, particularly in the introduction of his essay, point clearly toward this a problem confronting judges facing questions arising out of the administration of companies. Fortunately, as Justice Austin goes on to describe, the procedure is subject to judicial oversight, though the case law is still relatively undeveloped.

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