Deed of Company Arrangement
A Deed of Company Arrangement ‘DOCA’ may follow a Voluntary Administration. Directors hoping to save their business may place their company into Voluntary Administration.
The Insolvency Experts can Answer your Questions Regarding:
Who will manage the DOCA
The benefits of a DOCA
How creditor claims are treated
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Understanding A Company Deed of Arrangement
One of the possible outcomes of the administration process is for a Company to sign a Deed of Company Arrangement (DOCA) – an legally binding agreement between a company and its creditors as to how the company’s affairs are to be dealt with and how outstanding debts are to be paid.
Creditors will often agree to a DOCA if they are offered a better return on their outstanding debts than they would receive if the company were immediately placed into liquidation.
Who manages the DOCA?
It is usual that the Voluntary Administrator becomes the Deed Administrator when creditors vote in favour of a DOCA.
The role of the Deed Administrator will be set out in the DOCA itself but essentially, the role is to ensure the commitments made by the Company to the creditors are fulfilled.
What are the benefits of a DOCA?
A DOCA binds all unsecured creditors to the agreement with the company – even those that have voted against the proposal
It can also bind owners of property or those who lease property, and secured creditors if they have voted for the DOCA however, the agreement will not prevent a creditor holding a personal guarantee from taking action to recover their debt from the guarantor.
How are creditor claims treated under a DOCA?
The DOCA will stipulate the order in which creditor claims are to be paid. Occasionally, a Deed may propose that creditors are to be paid in the same priority as in a liquidation, other times, a different list of priorities will be agreed.
Whatever the case, a DOCA must ensure employee entitlements are paid in priority to other unsecured creditors. The only exception to this is where eligible employees have agreed to vary their priority claims.