DOCA (Deed of Company Arrangement)
Optimal turnaround success.
Experience flexibility
A DOCA can be tailored to the individual needs of the company, customising to their unique circumstances.
Take the edge off
Entering a DOCA releases you from insolvent trading claims by creditors.
Reset, reassess, and optimise
Rehabilitate the company as debts are being finalised.
What is a Deed of Company Arrangement (DOCA)?
A DOCA is a formal agreement through a Voluntary Administration between the company and its creditors to satisfy the company debts. It aims to maximise the chances of the company, or as much as possible of its business, continuing and providing return for creditors.
The proposal binds all creditors, setting terms and conditions of repayments that are appropriate to the company’s financial status. As the company continues to trade, DOCA contributions can be made from ongoing trading profits. A DOCA enables the company the opportunity to develop and grow.
DOCA Process
A DOCA gives your business the chance to propose a structured plan to manage debts and avoid liquidation. Where possible, it allows trading to continue under agreed terms. Here’s how the process works:
Contact us to appoint us as your administrator
We develop a tailored proposal
Creditors meet to vote on the approval of the DOCA
Execute terms of agreement and manage debts
Continue trading while tracking progress
How a DOCA avoids obstacles
A successful DOCA can provide great benefits to all stakeholders of the company. Relieving your stress, a DOCA can provide you with the following:
- Offset your trading losses against future profits.
- Employment for your staff continues.
- Your company arrangements and financiers may not be affected.
- As a Director, you can regain control of the company once DOCA is finalised.
- A DOCA may bind all creditors of the company to the terms outlined.
- Has potential to provide greater return and dividend to your creditors.
Comprehensive Advisory Beyond DOCA
Beyond immediate debt restructuring, Mackay Goodwin offers comprehensive advisory services to prevent future financial distress. Our corporate advisory experts focus on enhancing operational efficiencies and optimising strategic planning, ensuring your business stays ahead in a competitive market. From corporate debt restructuring to voluntary administration, our solutions are comprehensive, addressing current needs and future challenges.
Take Action Now with a DOCA
Mackay Goodwin stands by you in the most challenging times, equipped to guide you through financial recovery with expertise, integrity, and a commitment to achieving the best possible outcomes for your business.
Speak to our experts now and take the first step towards securing your business's future. The right support at the right time can make a significant difference. Act now – the sooner you start, the better your outcomes.
FAQs
A DOCA has wide-ranging effects on all aspects of the business, including its creditors and stakeholders. Decisions made during this process are dependent on the company and its owner, stakeholders such as directors and secretaries, shareholders, secured creditors who voted for the DOCA, unsecured creditors, anyone who owns company property, and anyone who leased property to the company.
Impacts include:
- During the time period for which a company is subject to a DOCA, it must include the words ‘subject to a Deed of Company Arrangement’ on all public documents and contracts.
- The DOCA binds the company, its officers, and its members to a defined and specific legal arrangement.
- The DOCA provides release arrangements and binds creditors to the details of specific timelines and financial agreements.
- The DOCA can release the company from certain debts.
- The Directors of the company can regain control with some restrictions.
Once a DOCA is executed, it takes over the management of the company and ends the Voluntary Administration period. A deed administrator - usually the former voluntary administrator - is appointed by creditors to oversee the process.
The Deed Administrator needs to ensure that the company and all other entities comply with all financial commitments and obligations under the new arrangement. They also need to report directly to ASIC on behalf of the company and DOCA agreement.
The DOCA typically ends once all payments are made, but it can also be terminated early by the court or creditors if the terms are breached. Once the DOCA terminates, the period of administration is over and the company can continue as a solvent entity.
The terms of the DOCA are designed to identify and denote the specific details of the arrangement. From the appointment of the administrator to the identification of restrictions and termination deadlines, these terms are integral to the ongoing management and impact of the DOCA process.
- Who is appointed the Deed Administrator?
- The identification of property available to pay creditors.
- The nature and term of the moratorium.
- How the company will be released from its debts.
- When the DOCA will terminate and how.
- What restrictions the directors are bound by.
- How and in what order the proceeds of the company’s assets are distributed.
Creditor claims are paid in a specific order depending on the terms of the deed. Deed proposal payment schedules often function in a similar time frame to liquidation schedules, although this is not always the case. If a different priority has been proposed, it’s important to review the appropriate documents or contact the Deed Administrator. For example, employee entitlements are generally prioritised over those of other unsecured creditors.
If you are a creditor and the Deed Administrator rejects your claim, it’s important to contact the Deed Administrator.
As a separate legal arrangement, this creditors’ trust is primarily used to speed up the company’s exit schedule. During this process, all creditors’ claims are transferred to the newly created trust, with the DOCA generally terminating after the creditors’ claims have been moved. The effects of a DOCA can have a severe impact on both creditors and business owners. In certain cases, a creditors’ trust can be used as a restructuring tool to minimise the risks associated with administration and asset sales.
A creditors’ trust can help to clean up the balance sheet and ensure the successful sale of the company. By enabling the sale of the company and not just its assets, this arrangement can help to favour both the purchaser and the creditors. If managed correctly, the trust can help extract extra value from the sale, which is passed onto creditors in the form of a larger dividend. While a creditors’ trust may potentially deprive creditors of certain statutory protections that exist under the DOCA, it can also offer additional resources and freedoms.
When a company enters a DOCA, creditors are bound by the binding arrangement set out in the deed, which outlines how debts will be managed and repaid. Creditors may be required to complete a claim form to establish the extent provided for their debt under the DOCA.
This process can halt legal proceedings, offering an alternative to immediate winding up of the company. In many cases, the DOCA allows creditors to receive a lump sum or periodic payment, often resulting in a better return than liquidation.
It’s important for each person or creditor to assess their position carefully, as the DOCA terms may vary and can impact recovery outcomes depending on their priority or security status.