The recent news that David Jones, one of Australia’s oldest and most recognisable retailers, has entered financial distress is a timely reminder that even long-established and well-known businesses are not immune from financial difficulties.
Founded in 1838, David Jones has been part of the Australian retail landscape for 188 years. Its reported financial difficulties, following unsuccessful negotiations with major landlords over rental arrangements and restructuring proposals, have raised serious questions about the future of the business, its employees and the many suppliers who rely upon it.
The situation also provides a useful opportunity to explain two terms that are frequently used when businesses experience financial difficulties: receivership and voluntary administration.
Although the two processes can occur at the same time, they have different purposes, involve different appointments and can produce very different outcomes.
What is voluntary administration?
Voluntary administration is a formal insolvency process designed to give a financially distressed company an opportunity to restructure its affairs and, where possible, survive.
When a company enters voluntary administration, an independent registered liquidator is appointed as the administrator. The administrator takes control of the company’s affairs and investigates its financial position, business operations, assets and liabilities.
The objective is to determine whether the company, or at least its underlying business, can be saved.
Importantly, voluntary administration provides a period of breathing space. There is generally a moratorium on creditors taking certain recovery action against the company, allowing the administrator to investigate the business and consider its future without the immediate pressure of individual creditor enforcement proceedings.
The administrator will ultimately present creditors with recommendations about the company’s future. There are generally three possible outcomes:
- Return to the directors: The company may return to the control of its directors if it can demonstrate that it is able to continue trading and meet its financial obligations.
- Deed of Company Arrangement (DOCA): The company may enter into a binding arrangement with its creditors to pay some or all of its debts over an agreed period or on agreed terms. This can involve a restructure, a compromise of debts or a sale of the business.
- Liquidation: If there is no viable proposal to save the company, creditors may resolve that it should be wound up and its assets distributed in accordance with insolvency law.
The important point is that voluntary administration does not automatically mean that a business will close. It is a process that can provide an opportunity for a business to be restructured, sold or returned to financial health.
What is receivership?
Receivership is different.
A receiver is generally appointed by a secured creditor, such as a bank or other lender, which holds security over some or all of a company’s assets. The appointment is usually made under the terms of a security agreement, although a court can also appoint a receiver.
The receiver’s primary responsibility is to protect and realise the secured assets to repay the creditor that appointed them.
For example, if a bank has lent a company $20 million and holds security over its business assets, it may appoint a receiver when the company defaults on its loan obligations.
The receiver may take control of the secured assets, continue operating the business for a period, sell assets or arrange a sale of the business as a going concern.
Unlike voluntary administration, receivership is principally concerned with protecting the interests of the secured creditor rather than determining the best overall outcome for all creditors.
Can both happen at the same time?
Yes. This is an important distinction in the David Jones situation.
Media reports on 5 November 2026 identify the appointment of voluntary administrators to David Jones, together with the appointment of receivers by its secured lender, Hilco Capital.
These appointments are not mutually exclusive.
The voluntary administrators are concerned with investigating the company’s financial position and determining the best outcome for the company and its creditors generally. The receivers, meanwhile, are primarily concerned with protecting the secured lender’s interests.
This can create competing commercial considerations, particularly where the administrators are trying to preserve the business as a going concern while the receivers are seeking to maximise the recovery of secured debt.
Famous businesses that have made a comeback
Financial distress does not necessarily mean the end of a business or its brand. There are some notable examples of businesses that have emerged from formal insolvency and restructuring processes.
Virgin Australia
Perhaps the most relevant Australian example is Virgin Australia. In April 2020, during the COVID-19 pandemic, the airline entered voluntary administration after experiencing significant financial difficulties.
The administrators undertook a sale and restructuring process, with Bain Capital ultimately acquiring the business in November 2020. Virgin Australia subsequently recommenced operations under new ownership and continues to operate as a major Australian airline.
This is an excellent example of how voluntary administration can provide a pathway for an established business to survive, even where its previous financial structure is no longer sustainable.
General Motors
One of the world’s largest automotive manufacturers, General Motors, entered Chapter 11 bankruptcy proceedings in the United States in 2009 following significant financial difficulties.
The restructuring involved substantial government support, changes to management, the reduction of debt and the sale of the operating business into a new corporate structure.
General Motors emerged from the process and subsequently returned to profitability, listing its shares publicly in 2010.
Chrysler
Another famous automotive example is Chrysler. The company entered Chapter 11 bankruptcy protection in 2009 and underwent a major restructuring involving its partnership with Fiat.
A new Chrysler business emerged from the process, with reduced costs, a restructured operation and a renewed product strategy. The business returned to profitability and eventually became part of the Fiat Chrysler group.
These examples demonstrate that restructuring can sometimes preserve a business that might otherwise have disappeared.
What does this mean for business owners?
The most important lesson for business owners and directors is that financial difficulties should be addressed early.
Waiting until creditors are demanding payment, suppliers are withdrawing credit and cash flow has become unmanageable can significantly reduce the available options.
Directors also need to understand their obligations under the Corporations Act 2001 (Cth), particularly their duty to prevent insolvent trading. Continuing to incur debts when a company is insolvent, or is likely to become insolvent, can expose directors to personal liability.
Voluntary administration, receivership and other restructuring options are not necessarily signs of failure. When used appropriately and at the right time, they can provide a pathway to preserve jobs, protect business value and give a viable business a second chance.
Whether David Jones will ultimately achieve that outcome remains to be seen. However, its situation is a timely reminder that, in business, financial difficulty does not always have to mean the end of the story.
About the Author: This article was authored by Steven Brown, Steven Brown’s legal career covers working with multinational corporations and Australian listed companies to family-owned businesses. This range of experience has equipped Steven with the unique ability to offer tailored legal services that make a significant difference to businesses of all sizes.
