Freedom Insurance has reached an in-principle agreement to transfer its policy administration business to a third party.

The sale will net $5 million, which it will use to pay creditors, wind down operations and meet regulatory obligations. Excess funds will be returned to shareholders.

The $5 million reflects the value of net trail commissions after offsetting commission clawbacks, administration costs and customer remediation.

Freedom negotiated an interim commission clawback to allow ongoing administration and prepare for an orderly transition.

It was exploring options to keep its administration business – including its rights to trail commissions – but an expected liquidity shortfall has accelerated after a significant rise in policy lapse rates, leaving it with few options.

Freedom subsequently intends to exit its wealth management business, at which point it will have exited all its operating businesses.

The board expects to make an announcement on its financial position after the transition.

Freedom’s long-term financial stability has been uncertain since it halted new sales and stopped phone sales for term life and trauma products following criticism of its high-pressure sales tactics. It suspended trading last month.