So much thought and effort went into the drafting and design of the Voluntary Administration (VA) regime but was it all worth it?

Since the new regime came into effect in November 2007 more than 6000 companies have fallen into liquidation, and a mere 40 have entered the VA regime.

For those of us on the frontlines of insolvency, this is a great shame. It is like having the cure for a disease but no one comes to see you about it until they are so sick your cure is powerless to help.

Voluntary Administration gives struggling companies an alternative to liquidation or the difficult and flawed Compromise with Creditors (part 14 of the Companies Act).

A company in trouble, especially tax trouble, really had only one option before November 2007 and that was liquidation.

Now, if they elect Voluntary Administration they sign up for a five-week rollercoaster that may see them emerge with a deal with their creditors that will allow the business to be saved.

The administration starts when the directors sign their company over to an administrator.

The administrator has five weeks to negotiate a deal with the company creditors to try to save the business.

This agreement with the creditors is called the Deed of Company Arrangement (or Doca).

The most common deal is one where the creditors agree to accept a payment of their debts over time.

The company is then handed back to the board with a new lease of life.

There are three key elements to the regime that makes it work.

The first is that the administrator must accept personal responsibility for the debts of the company while it is in administration.

This is important because it gives staff and suppliers confidence in dealing with a company in administration.

The second is that any agreement reached with the creditors is binding on the Inland Revenue and the third element is the flexibility of the arrangements that can be entered into through the Doca.

A Doca is limited only by the imagination of the administrator and the willingness of the creditors and the company to engage in non-linear arrangements.

These can include forcing the directors to gain better accounting advice, restrictions on directors' salaries and reviews of the company's performance by creditors' representatives.

After five weeks a meeting of creditors votes on the administrator's proposal. The proposal needs the support of over half the creditors by number and more than 75 per cent of the total debt. If only one of these is achieved the administrator can exercise a casting vote to approve the Doca.

Of the 40 companies which have elected for VA 15 have emerged with a Doca, the rest went into liquidation.

There have been two high-profile successes. The Fine Wine Delivery Company was navigated through the regime by Gareth Hoole from Staples Rodway, and the Jones Group of companies, publishers of Dish magazine, were restructured under the regime, allowing the mastheads to be successfully sold by Waterstone Insolvency.

Other successes were a Jennian Holmes franchise where the most prolific Doca factory to date, insolvency firm Gerry Rea, engineered a successful revival of the business to allow the completion of several houses on the North Shore, and even Doug Somers-Edgar has been in on the act with one of his firms, Orange Insurance, entering and exiting the regime successfully.

There have been failures, too, including Icon Digital (the Blockbuster and Sounds franchise owner) that went into administration only to fall into liquidation, as did listed entity Dominion Finance and Blue Chip entity Sword Fish Lodge Management.

Companies likely to benefit from the regime are those which have been hit with an unexpected negative shock, such as a large debtor going into liquidation, or where a start-up firm has grown too fast and although profitable cannot pay its historical debts.

These firms typically receive support from their creditors, especially where the directors have been honest with suppliers and staff when they get into trouble.

Firms with weak management and not offering any change in their business are likely to get the thumbs-down from their creditors, who would rather see the firm pass into liquidation than have to deal with the directors again.

This is especially the case where the directors have been avoiding or lying to their creditors. From the perspective of the insolvency profession, our biggest frustration is that firms come to us far too late.

The administration regime could almost have been written with this recession in mind.

If you are reading this and thinking that your business, or the business that your work in, needs a second chance, take this article to your accountant or boss.

Do it today and find a competent insolvency firm to help you through the process. Tomorrow may be too late.

* Damien Grant is a liquidator with Waterstone Insolvency.