When negotiating with creditors, one needs to be able to assure them that you are looking out for their best interests. A deed of company arrangement, or DOCA, is one such method of assurance.
What is it?
A DOCA is a document that outlines exactly how a company’s affairs will be dealt with. It’s a binding arrangement between the company and the creditors that outlines how the business can continue trading in order to best satisfy the creditors, rather than winding the business up.
Firstly, the creditors might vote for a proposal that the company enter a DOCA. If this is the case, the company has 15 days to sign the DOCA. If the company decides not to, or if the company fails to meet the timing, the company automatically enters liquidation. Once in place, the DOCA binds the company, property owners and those that lease property, the secured creditors that voted for the deed and all unsecured creditors and court ordered individuals (even if they voted against the deed).
What doesn’t it do?
A DOCA won’t protect a director from action being taken on personal guarantees. It also doesn’t necessarily mean that all creditors will be satisfied – a creditor must apply with a ‘proof of debt’ and could be rejected from involvement in the DOCA if insufficient. Finally, a DOCA doesn’t leave you free to pursue trading again. It means that your company will be externally administered until the arrangements outlined in the DOCA are satisfied.
So, what is a DOCA? A jargon phrase that simply refers to terms of repayment of debt.