Administrator’s Right of Indemnity

30.03.26
administrators-right-of-indemnity

Written by Litigation and Dispute Resolution Senior Associate Jesse Clough and Law Clerk Joseph Marescia |  Last reviewed: April 2026

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Under section 443D of the Corporations Act 2001 (Cth), an administrator of a company under administration has a statutory right to be indemnified out of the company’s property. This covers debts the administrator becomes personally liable for while performing their functions, other debts, liabilities, damages or losses incurred in good faith and without negligence, and the administrator’s own remuneration. Section 443F secures this right with a statutory lien over the company’s property, which generally ranks ahead of other charges (including floating charges), except for a perfected security interest under the Personal Property Securities Act 2009 (PPSA).

ADMINISTRATOR’S RIGHT OF INDEMNITY

Section 443D of the Corporations Act 2001 (Cth) (‘Act’) stipulates that the administrator of a company under administration is entitled to be indemnified out of the company’s property for:

  1. debts for which the administrator is liable in performing or purporting to perform the administrator’s functions as administrator; and/or
  2. any other debts or liabilities incurred, or damages or losses sustained in good faith and without negligence through performance of their functions as administrator; and/or
  3. the remuneration to which they are entitled.

The administrator is given a statutory lien on the company’s property under section 443F of the Act to secure the right of indemnity.

Under section 443F(2) of the Act, this statutory lien takes priority over any charge on the company’s property (including a floating charge), subject only to the exception for a PPSA security interest that is perfected within the meaning of the Personal Property Securities Act 2009 (‘PPSA’).

WHAT IS A LIEN?

A lien is a legal right to hold another person and/or entity’s property as security for the performance of an obligation, or the payment of a debt. Under Australian law, a lien can arise from common law and equity or be created by statute.

THIRD PARTY INTERESTS IN COMPANY PROPERTY

The administrator may not be the only party with a lien on company property, such that a third party may have a secured interest in company property.

Section 440B of the Act imposes a moratorium on the enforcement of security interests in company property during administration, thereby preventing chargees and other secured parties from dealing with or enforcing against company property without leave of the Court or the administrator’s consent.

As a general rule, the administrator’s statutory lien takes priority over a charge over company property, and a chargee cannot enforce the security interest during the administration without the consent of the administrator or leave of the Court. However, where a third party holds a PPSA security interest that is perfected, that interest may take priority over the administrator’s lien.

WHAT IF A THIRD PARTY IS IN POSSESSION OF COMPANY PROPERTY?

A third party may interfere with an administrator’s lien on company property where the third party has both a secured interest and possession.

Section 440B(3) of the Act states that if a third party has a security interest for possession of company property, the third party may continue to possess the property during the company’s administration if the property is in lawful possession. However, a third party cannot sell or liquidate the property, or otherwise enforce the security interest.

Suppose the third party’s possession is unlawful. In that case, the administrator may be able to take possession of the company property or assets despite the third party’s possessory security interest, subject to the specific circumstances.

RAMSDEN LAWYERS – HOW WE CAN HELP YOU

Navigating your right of indemnity as an administrator of a company under administration can be difficult. If you are unsure of how to lawfully exercise your right of indemnity or have a dispute relating to possession of company property, we encourage you to seek professional advice at the earliest opportunity to comprehensively consider your options.

If you are seeking legal advice, Ramsden Lawyers can assist you. We are happy to arrange an obligation-free initial consultation to assist you in navigating the relevant legislation for your circumstances. Our Litigation and Dispute Resolution Division has extensive expertise in advising administrators and other stakeholders on their rights and obligations in voluntary administrations.

The content of this article is intended to provide general guidance to the subject matter and must not be relied on as legal advice. Specific advice should be sought about your circumstances.

FREQUENTLY ASKED QUESTIONS

What is an administrator's right of indemnity?

An administrator’s right of indemnity is a statutory entitlement under section 443D of the Corporations Act 2001 (Cth) to be reimbursed out of the company’s property for costs and liabilities incurred while acting as an administrator. This exists because administrators can become personally exposed to debts and liabilities while carrying out their role, and the Act ensures they can recover these from the company rather than bearing them personally.

What exactly does section 443D cover?

Section 443D entitles the administrator to indemnification for three things: debts they are liable for in performing or purporting to perform their functions as administrator; other debts, liabilities, damages, or losses sustained in good faith and without negligence through performing those functions; and the remuneration they are entitled to for the administration. Together, these provisions are designed to ensure administrators are not left out of pocket for properly performing their statutory role.

What is a lien, and how does it secure the right of indemnity?

A lien is a legal right to hold another person’s or entity’s property as security for the performance of an obligation or payment of a debt. Under Australian law, a lien may arise at common law, in equity, or under statute. Section 443F of the Corporations Act creates a statutory lien in favour of the administrator over the company’s property, giving practical effect to the right of indemnity by allowing the administrator to look to that property for payment.

Does the administrator's lien take priority over other charges on company property?

Yes. Under section 443F(2) of the Corporations Act, the administrator’s statutory lien takes priority over any charge on the company’s property, including a floating charge. This means that, as a general rule, a chargee’s security interest ranks behind the administrator’s right to be indemnified.

Are there any exceptions to the administrator's priority?

Yes, one key exception. The administrator’s statutory lien does not take priority over a PPSA security interest that is perfected within the meaning of the Personal Property Securities Act 2009 (PPSA). Where a third party holds a perfected security interest, that interest may rank ahead of the administrator’s lien over the relevant property.

Can secured creditors enforce their security during the administration?

Generally, no. Section 440B of the Corporations Act imposes a moratorium on the enforcement of security interests in company property during the administration. This prevents chargees and other secured parties from dealing with or enforcing against company property unless they obtain the administrator’s consent or leave of the Court.

What happens if a third party is already in possession of company property?

If a third party holds a security interest and is in lawful possession of company property, section 440B(3) allows them to continue that possession during the administration. However, the third party cannot sell, liquidate, or otherwise enforce the security interest while the moratorium applies. If the third party’s possession is unlawful, the administrator may, depending on the circumstances, be able to take possession of the property despite the third party’s possessory security interest.

What should an administrator do if a dispute arises over their right of indemnity or possession of company property?

Because these issues can involve competing statutory rights, third-party interests, and factual questions about lawful possession, administrators facing uncertainty or disputes should seek professional legal advice promptly. Ramsden Lawyers’ Litigation and Dispute Resolution Division has extensive experience advising administrators and other stakeholders on their rights and obligations in voluntary administrations, and offers an obligation-free initial consultation to help navigate these issues.

The content of this is intended to provide general guidance only and must not be relied on as legal advice. Specific advice should be sought about your circumstances.