Struggling with mounting debts and unsure whether liquidation is your only option? You may have heard of a Deed of Company Arrangement (DOCA), but the legal jargon can make it difficult to know the meaning — and whether it’s right for your business.
At SALEA Advisory, we help financially distressed businesses understand their options and regain control. We’ll define what a Deed of Company Arrangement is, how it works, and when it’s the right move. If you’re facing significant debt, a DOCA could be the tool to help your business recover.
What is a Deed of Company Arrangement?
A Deed of Company Arrangement is a formal agreement between a company and its creditors, entered into during the voluntary administration process.
Its purpose is to allow struggling businesses to restructure affairs, repay debts over time, and avoid liquidation.
Legally, a DOCA binds all unsecured creditors (including any who voted against it), provided that a majority in number and value approve the proposal. It’s designed to maximise the chances of the company continuing operations — or, if that’s not viable, to deliver a better outcome for creditors than immediate winding up.
How Does a DOCA Work?
Once a company enters voluntary administration, the appointed external administrator reviews the company’s financial position and recommends a course of action. If the business is salvageable, the administrator may propose a DOCA in a meeting of creditors.
Creditors then vote on the proposal. For it to proceed, over 50% of creditors (by number and value) must approve it. If there is a deadlock with respect to the votes, the Administrator holds a casting vote and will vote in accordance with his recommendation made to creditors. If the vote passes, the company must sign the DOCA within 15 business days. If not, the company moves into liquidation.
The arrangement sets out:
- How debts will be repaid (full or partial payments, lump sum or instalments)
- How long the arrangement will last
- Any changes to the company’s operations or management
- Who will administer the DOCA (typically the voluntary administrator)
Once signed, the DOCA becomes binding and guides the company’s operations moving forward.
Is a DOCA Right for Me?
A DOCA can be a powerful tool for fundamentally viable businesses facing short-term financial distress. You might consider one if:
- Your business is unable to meet its obligations, but has a realistic plan to pay creditors over time
- You want to continue trading and retain control of your operations
- You believe creditors will approve a proposal that offers them a better return than liquidation
That said, a DOCA is not suitable for every situation. If your business has no realistic prospect of recovery or the debt levels are too severe, liquidation may be the more appropriate course of action.
Every situation is unique, which is why it’s essential to engage a qualified administrator early to assess your specific needs.
What Are the Outcomes of a DOCA?
A successful DOCA enables the business to continue trading, repay creditors under new terms, and exit administration once the agreement is completed. This preserves jobs, relationships, and long-term business value.
However, not all DOCAs succeed. A company may be terminated (and placed into liquidation) if it fails to meet its obligations. In that case, the liquidator will sell company assets to repay creditors in order of priority.
Why Engage an Expert?
The earlier you seek expert advice, the more restructuring options become available, including a DOCA. At SALEA Advisory, our team guides businesses through voluntary administration, assesses whether a DOCA is appropriate, and negotiates with creditors.
We work closely with business owners and their advisers to develop practical solutions with lasting benefits.
Understanding the Role of a DOCA in Business Recovery
You should now have a clearer understanding of what a Deed of Company Arrangement is and when it might be used to save your business. A successful DOCA allows viable companies to restructure their debt, continue trading, and avoid the consequences of liquidation.
SALEA Advisory can help you identify whether a DOCA could offer a second chance for your company. If you (or your client) are facing insolvency, early intervention is critical. Speak with a restructuring expert who can assess your situation and explain your options.
Our team has decades of experience in corporate restructuring and voluntary administration and will work closely with you to navigate the path to recovery.
Contact us today to book a confidential consultation, or download our free guide to Voluntary Administration for more information.
