Deed of Company Arrangement (DOCA)

When can these be options for me?

When is a Debt Restructure or DOCA an option for me?

A debt restructure or Deed of Company Arrangement (DOCA) can be an option if the business is simply unable to pay all creditors in full, the director wishes to make the best offer they can to creditors in full and final satisfaction of the debts, or time to pay the debts in full, and the director wants the company to continue to trade within the existing corporate structure.

Some companies may be eligible to use the Small Business Restructure know as debt restructure process. For others, such as those that owe in excess of $1m, a DOCA becomes the option for formal negotiations. If creditors agree to the proposal, all creditors are bound to the outcome, whether they voted in favour of it or not.

  • Communications

    What is a Debt Restructure?

    The debt restructuring process is referred to as a “debtor in possession” model. This means the director (rather than a Voluntary Administrator) continues to run the business and can continue to buy and sell assets in the normal course of business.

    The process starts with the appointment of a Small Business Restructuring Practitioner (SBRP). Only the director(s) can appoint a SBRP – creditors cannot. While the directors can trade the business and buy and sell assets in the normal course, any sale of the business or other types of asset sales requires the approval of the SBRP.

    The role of the SBRP is to work with the directors and help them put forward an offer to creditors. Creditors then vote on the proposal. If more than 50% by dollar value of the creditors who vote on the proposal accept, the proposal is successful. If not, the company could use the simplified liquidation model to bring finality to its affairs.

    The amount offered under the proposal then needs to be paid to creditors. The maximum term for this payment plan is 3 years.

  • Agreement

    What is a Deed of Company Arrangement?

    While debt restructuring and Deeds of Company Arrangements are very similar, there are some important differences.

    Before a DOCA can be proposed, a company has to be placed into Voluntary Administration and a Voluntary Administrator needs to be appointed.

    During the period of the Voluntary Administration the Administrator, rather than the director(s), has control of the company’s assets and operations.

    Another big difference is in the process is that under a Voluntary Administration the Administrator conducts extensive investigations and an assessment of the likely return to unsecured creditors in a liquidation. This is then compared and contrasted to the amount offered under the proposed DOCA.

    The Voluntary Administrator will then make a recommendation to creditors as to whether they should accept the proposed DOCA, whether they should place the company into liquidation, or whether the company should be returned to the control of the director(s).

    Related parties are entitled to vote under a DOCA, but not in a small business restructure.

    There can be a series of options for voting under a Voluntary Administration:

    • by the voices (physical number of creditors)
    • a poll (any creditor can call a poll and voting is based on the number of creditors voting and the value of their debts)
    • in case of a tie (ie, a majority of creditors in number but not value, or vice versa, vote in favour of a resolution) the Voluntary Administrator may cast the deciding vote.

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Did You Know?

Commercial Necessity Phoenix is legal and recognises the fact that sometimes the need to restructure (phoenix) may arise out of events outside of the business owner’s control. This type of phoenix is considered a business rescue.

Business Restructure

How it Works

If you are considering a business restructure, de Jonge Read will review your situation carefully. We consider both business and personal aspects.

We then prepare a written recommendation, specifically designed to your unique circumstance on how to achieve the best outcome possible for you and your business.

We do this obligation-free and at no cost to you!

  • 1 Schedule a free consultation with one of our strategists
  • 2 A no-obligation tailored strategy is prepared to suit your individual circumstances
  • 3 If you decide to proceed, you’ll have a Strategy Support Officer assigned to you. Our team is here to hold your hand throughout the whole process