What is a deed of company arrangement?
A deed of company arrangement (DOCA) is a binding arrangement between a company and its creditors that governs how the company’s affairs will be handled if the company is at a risk of becoming insolvent or has already entered into voluntary administration. A DOCA can be used to help the company avoid winding up. A DOCA will aim to maximise the probability of the company carrying on or provide a better return for the creditors.
A DOCA will bind the company, its officers and its members, including unsecured creditors, regardless of if they voted against the proposal.
What does the Deed of Company Arrangement cover?
The DOCA needs to cover a range of things such as;
- who will be the deed administrator
- identification of the property that is available to pay creditors
- the nature and term of any moratorium
- the extent to which the company will be released from its debts
- how and when the DOCA will terminate
- the relevant day in which claims arose if the DOCA is to include them; and
- the order in which any proceeds of the company’s assets are to be distributed
How long do I have?
If creditors vote for a proposal that the company enter a DOCA, the DOCA must be executed by the company within 15 business days after the end of the meeting of creditors, where the creditors chose to enter into the DOCA, unless the court allows a longer period of time.
If the DOCA is not executed within the relevant time, the company will automatically go into liquidation and the voluntary administrator will become the liquidator.
How to creditors get paid?
Payment of dividends to creditors are the same procedures for payment of a dividend in liquidation. The Deed Administrator will request Proofs of Debt from creditors. The order in which claims from creditors are paid will depend on the DOCA terms.
Who monitors the DOCA?
The Deed Administrator ensures that the company carries through the commitments made in the DOCA. Their role will be set out in the Deed.
If your company is struggling and you want to keep you company solvent, our team are always happy to help and can give you advice regarding a Deed of Company Arrangement. Give us a call on 1300 023 782 or email us at email@example.com. Ask Craig Dangar for guidance.