Deed of Company Arrangement

Deed of Company Arrangement is a binding agreement between a company and its creditors governing how the company’s affairs will be dealt with, which may be agreed to as a result of the company entering voluntary administration. Voluntary administration, combined with a Deed of Company Arrangement, aims to maximize the chances of a company, or as much as possible of its business, continuing, or to provide a better return for creditors than an immediate winding up or liquidation of a company.

This is a quick snapshot on Deed of Company Arrangement. You should ask us, in your circumstances, how will voluntary administration followed by a Deed of Company Arrangement benefit stakeholders such as owners, directors, employees, suppliers and other creditors?; what are the advantages and disadvantages?; and what about director liability?

There is a great deal of flexibility in the type of arrangement that can be put to creditors to achieve a DOCA. Examples of some of the types of Deeds are as follows.

(i) The freezing or reduction of creditors’ claims releasing liquidity to the company to permit it to conduct its business, to complete work-in-progress or in order to conclude negotiations for the sale of its business.

(ii) Continued trading with or without the injection of fresh equity capital resulting in expected generation of profits enabling a repayment to existing creditors and continued custom for those existing creditors.

(iii) Merger or re-organisation resulting in the creation of a new company or the realisation of specific assets for the benefit of creditors.

(iv) Take over the company or its business by a purchaser capable of introducing expertise, capital or some other benefit.

(v) A terminating deed - one or more pools of cash is created for sharing amongst one or more classes of creditors. The DOCA terminates and provides for the release of all creditors’ claims against the company.

This information is not a substitute for advice concerning your circumstances. Liability limited by a Scheme approved under the Professional Standards Legislation. 

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