Deed of company arrangement
Commonly referred to as a ‘DOCA’, a deed of company arrangement is an agreement between a company and its creditors determining how the affairs and assets of the company will be distributed and dealt with to satisfy the company’s unpaid debts. Generally, a DOCA is entered into when a company is at risk of becoming insolvent, or when a voluntary administrator is appointed. A DOCA aims to increase the company’s lifespan by improving their financial viability, or to provide a better return for creditors than an immediate winding up of the company, or both.
If creditors vote for a DOCA, the company must sign the deed within 15 days (unless the court specifically allows for a longer period) or the company will automatically go into liquidation, headed by the voluntary administrator. The DOCA binds all unsecured creditors regardless of their vote. It binds owners of property, those who lease to the company, and secured creditors if they voted for the deed.
The DOCA is monitored by a deed administrator, and can also be informally monitored by the stakeholding creditors. In order to receive payment from a DOCA, parties must submit proof of debt or claim and have it assessed by the deed administrator.
A DOCA does not prevent a creditor holding a personal guarantee from the director or other person from taking action to be repaid their debt.
In some cases, a DOCA necessitates the creation of a creditor’s trust.
