Deeds of Company Arrangement
A proposal for a Deed of Company Arrangement (DOCA) can be put to creditors by the Voluntary Administrator.
The Voluntary Administrator must recommend whether the DOCA is in the best interests of creditors. The test for any DOCA proposal is whether creditors will receive a higher dividend under the proposed DOCA compared to liquidation. Creditors must first approve the proposal for a DOCA at the second meeting of creditors (which is at the end of the Voluntary Administration process). If the DOCA is approved by at least 50% of the creditors, it then becomes legally binding on all unsecured creditors once executed by the company and the Deed Administrator (who will then administer the DOCA). A DOCA proposal can be extremely flexible. A few examples of a DOCA proposal may be as follows:
- An immediate one off payment (usually a third party contribution made by a director or shareholder) to creditors in full and final settlement of their claims.
- An immediate payment to creditors (usually a third party contribution made by a director or shareholder) with the possibility of a further payment to be made from the proceeds of litigation or through the realisation of assets.
- A series of payments to be made from the profits of ongoing trading for a specified period, conducted under the supervision of the deed administrator.