What is a Deed of Company Arrangement?

A Deed of Company Arrangement (DOCA) is one of the options available as a consequence of a company having been placed into Voluntary Administration.

A Deed of Company Arrangement is the end result of a proposal accepted by a company's creditors and usually will involved either;

• a moritorium of the company's debts for a set period of time
• a composition that sees creditors accept something less than 100 cents in the dollar on their debts
• a plan to repay the outstanding amount by installments
• a combination of any of the above arrangements

It is noted that prior to a Deed of Company Arrangement may flow as one of the consequences of a company entering a Voluntary Administration (VA). During the VA, the Administrator is required to consider and report to creditors on the financial position of a company and, where the directors wish to put a proposal to the creditors, the Administrator must provide an assessment of the proposal together with a recommendation as to whether the proposal would be in the best interest of the creditors.

The test for a DOCA proposal is whether creditors of the company would receive a higher dividend under the proposed DOCA by comparison to an immediate liquidation scenario.