Deed of Company Arrangements FAQ’s
NR Consulting provide companies from all over Australia with Deed of Company Arrangements services tailored to meet the requirements of a various clients across a broad range of industries. If you require a Deed of Company Arrangement, then you need NR Consulting who are conveniently located in Brisbane, Gold Coast, Sunshine Coast, Toowoomba and Ipswich. Although we also provide Deed of Company Arrangements to people and companies no matter where you are located.
What is a deed of company arrangement (DOCA)?
A DOCA is a formal agreement between the company and its creditors and any other relevant third parties to satisfy company debts. The Deed will set out in its terms and conditions, warranties and indemnities, the extent or nature of obligations, and relationships between those persons party to it. The Deed binds all creditors, both secured (to the extent of their shortfalls) and unsecured, and releases the company from its debts at least to the extent provided for within its terms and conditions.
How long as a deed of company arrangement run for?
A DOCA runs for as long as is provided for in its terms. The deed must state the duration of its operation and the moratorium period. A deed which does not specify an end date or ending conditions is not valid.
Are secured creditors bound by the deed of company arrangement?
A secured creditor is only bound by a DOCA if they become a party to the deed or otherwise agree to be bound by it. The Court may make an Order which limits the rights of the secured creditor, but this is not common.
How does a deed of company arrangement affect guarantees from directors?
Creditors holding guarantees from directors are bound by the moratorium during the VA period. Guarantees can be enforced once a DOCA is signed or the company is wound up. The release of the company’s debt under the terms of the Deed does not discharge a guarantor’s liability for any shortfall.
Can creditors vary the deed of company arrangement after it has been executed?
Yes, creditors are able to vary or terminate the DOCA by resolution at a creditors’ meeting. This meeting must be convened by the administrator at the request of not less than ten percent of the value of all creditors. Alternatively, the administrator may convene such a meeting of creditors at his own volition. Any amendment to the Deed must also have the consent of the company.
What happens to tax losses?
A company proposing a DOCA is likely to have carried forward tax losses. These losses usually can be offset against profits from future trading of the company. However, carried forward losses may be lost or reduced if a company fails to pay its creditors 100 cents in the dollar. Directors should seek tax advice before entering a DOCA that contemplates tax losses being available.
Can a deed administrator pay dividends?
Yes. A deed administrator’s ultimate role is to pay a dividend to creditors.
How should the company be described?
While subject to a DOCA a company must advertise its status. For example, ABC Pty Ltd that is subject to a Deed of Company Arrangement should be described as ABC Pty Ltd (Subject to Deed of Company Arrangement) on all public documents.
When does a deed of company arrangement end?
The deed of company arrangement ends when its terms are fully completed and a final dividend has been paid to creditors.
What happens if the company does not comply with the deed of company arrangement?
If the terms of a DOCA are not satisfied, it will be considered to be in default. Usually a default notice will be issued within a few days after the default. If the default is not rectified within the period set out in the notice, the agreement will be breached and may be terminated by:
(i) the provisions of the agreement, automatically terminating the DOCA; (ii) the passing of a resolution at a meeting of creditors, or (iii) an application to the Court.
These options will usually result in the company being placed into liquidation at that time.