A Deed of Company Arrangement (DOCA) is a vital tool for businesses facing financial challenges, offering a structured pathway to manage debts, avoid liquidation, and regain stability. This legally binding agreement between a company in distress and its creditors enables businesses to continue operating while working toward financial recovery. At apickle, we work hand-in-hand with insolvency practitioners to empower directors with accessible equity through our Commercial Debt Restructuring Home Loan.
This solution provides the financial strength needed to support your DOCA, improve the cents-to-the-dollar ratio, and stabilise balance sheets.
Our approach not only increases the likelihood of regaining control of your company but also ensures a smoother path to exiting administration.
Let apickle help you transform challenges into opportunities for recovery and growth.
What Is a Deed of Company Arrangement (DOCA)?
A Deed of Company Arrangement (DOCA) is a formal agreement made between a company in voluntary administration and its creditors. The agreement outlines how the company will manage its debts, including repayment terms and strategies for business restructuring. Governed by Australian insolvency laws, a DOCA is designed to maximise returns to creditors while allowing the business to continue operations.
The key objectives of a DOCA are to:
- Protect the company from immediate liquidation.
- Provide creditors with better returns than would be achieved through liquidation.
- Allow the company to restructure its operations and finances for long-term viability.
What is a DOCA? It’s a second chance for businesses in distress—a legally structured plan to recover from financial hardship while keeping operations intact.
The Purpose and Benefits of a DOCA
For businesses in financial difficulty, a DOCA offers several critical advantages:
- Avoids Liquidation: Instead of ceasing operations and selling assets, a DOCA enables the company to remain in business, preserving jobs and relationships with customers and suppliers.
- Preserves Business Value: By continuing operations, the company maintains its market presence, goodwill, and reputation, which are often lost in liquidation.
- Flexible Payment Terms: DOCAs allow businesses to negotiate manageable repayment plans with creditors, often including reduced debt amounts.
- Maximises Creditor Returns: Creditors typically receive higher returns under a DOCA than they would through liquidation, making it a mutually beneficial solution.
- Time to Reorganise: The DOCA provides breathing space to reorganise and implement changes to improve efficiency and profitability.
- Protects Directors from Insolvency Actions: Entering a DOCA demonstrates a proactive approach to financial difficulties, potentially protecting directors from personal liability.
By understanding what a deed of company arrangement means, businesses can leverage its benefits to achieve financial stability and future growth.
How a Deed of Company Arrangement Works
The DOCA process is a structured pathway designed to ensure fairness for creditors while giving the company an opportunity to recover. Here’s how it works:
Entering Voluntary Administration
A DOCA can only be proposed once the company is in voluntary administration. This phase allows an independent administrator to take control of the business and assess its financial situation.
Administrator’s Review
The administrator conducts a detailed review of the company’s assets, liabilities, and operations. Based on this analysis, they determine whether a DOCA is a viable option.
Proposal of the DOCA
The administrator collaborates with the company’s directors to draft the DOCA, outlining payment terms, operational changes, and timelines.
First Creditors’ Meeting
Held within eight business days, this meeting introduces the administrator, explains the process, and allows creditors to provide input.
Second Creditors’ Meeting
Held within 25–30 business days, this meeting is critical. Creditors vote on whether to approve the proposed DOCA. Approval requires a majority vote by value and number of creditors.
Implementation of the DOCA
Once approved, the DOCA is executed. The administrator oversees its implementation, ensuring the company adheres to its terms and repayments are made as agreed.
Completion and Return to Directors
Upon successful completion of the DOCA’s terms, control of the company is returned to its directors, free from the debts covered under the agreement.
This process ensures transparency and accountability, balancing the needs of creditors with the company’s goal of financial recovery.
Key Components of a DOCA
Each DOCA is tailored to the specific needs of the company and its creditors, but most include the following essential elements:
- Debt Repayment Terms: A clear plan outlining how much will be repaid, to whom, and over what period.
- Debt Reductions or Waivers: Agreements to reduce or waive certain debts to make repayments feasible.
- Operational Restructuring: Plans to improve efficiency, reduce costs, and address operational weaknesses.
- Timelines: Defined schedules for repayment and the completion of restructuring activities.
- Creditor Prioritisation: Guidelines on how repayments will be allocated, often prioritising secured creditors over unsecured ones.
- Administrator Oversight: Continued involvement of the administrator to monitor progress and ensure compliance with the agreement.
These components form the backbone of a DOCA, ensuring it is practical, fair, and achievable.
Get Started with Our Deed of Company Arrangement Services
At apickle, we work hand-in-hand with insolvency practitioners to empower directors with accessible equity through our Commercial Debt Restructuring Home Loan.
This solution provides the financial strength needed to support your DOCA, improve the cents-to-the-dollar ratio, and stabilise balance sheets.
Our approach not only increases the likelihood of regaining control of your company but also ensures a smoother path to exiting administration.
Don’t let financial difficulties define your business’s future. Contact us today to learn more about what a deed of company arrangement means and how it can help you regain control and achieve financial stability.
FAQs About Deed of Company Arrangement
What is a DOCA, and how does it help businesses?
A DOCA is a legal agreement that allows a distressed company to restructure its debts and continue trading. It provides a framework for financial recovery while maximising returns to creditors.
What is the difference between a DOCA and liquidation?
A DOCA allows the company to remain operational and repay creditors under negotiated terms, whereas liquidation involves selling the company’s assets to repay debts, leading to its closure.
How long does a DOCA last?
Most DOCAs are designed to be completed within one to three years, depending on the company’s financial situation and the agreement with creditors.
Who oversees the DOCA process?
An independent administrator is responsible for drafting, implementing, and monitoring the DOCA to ensure compliance with its terms.
What happens if a company fails to meet the terms of a DOCA?
If the company cannot meet its obligations under the DOCA, it may proceed to liquidation, and creditors will seek repayment through the sale of the company’s assets.
