Transcript

Welcome back. My name is Chris Cook, a Principal at Worrells Brisbane. In the last video, we covered the timetable of a voluntary administration. We mentioned this thing called a Deed of Company Arrangement, or DOCA. In this video, you'll learn what a DOCA is, how it's proposed, assessed, presented to creditors, and implemented.

A DOCA is a binding agreement between a company and its creditors as part of the voluntary administration process. It's a tool under the Australian Corporations Act 2001 designed to maximise the chances of a company continuing to exist or to provide a better return to creditors than its immediate liquidation. It outlines how the company's affairs will be dealt with, aiming to satisfy the debts owed to creditors under specific terms. These terms might include restructuring the company's debts, selling off its assets to repay creditors, or injecting new capital into the business. The goal is to allow the company to survive, preserve jobs, and ensure a better return to creditors than they would receive if the company were immediately wound up.

The proposal for a DOCA typically comes from the directors after the company has entered the voluntary administration process, but it can also be proposed by creditors or even other third parties. The voluntary administrator's role is to assess the proposed DOCA. This assessment involves analysing the financial situation, the viability of the business continuing, and comparing the likely outcome for creditors under the DOCA versus that of a liquidation scenario. The administrator considers whether the DOCA is in the best interest of the creditors.

The administrator presents the DOCA proposal to the creditors in a detailed report before the second meeting of creditors. This report includes an explanation of how the DOCA works, how it compares to other options such as liquidation, and the administrator's recommendation. Creditors are given all necessary information to make an informed decision about the company's future. The administrator makes a recommendation to the creditors based on their assessment of the DOCA's feasibility and its comparison with these other options. The recommendation is part of the administrator's report and is designed to guide creditors in making a decision that maximises their return.

For a DOCA to be approved, a majority in both number and value of creditors voting at the meeting must vote in favor of the resolution. After approval, the DOCA binds all unsecured creditors, the company, and, if the DOCA so provides, the company's directors and other parties. The administrator then oversees the implementation of the DOCA according to its terms.

A DOCA is a flexible tool. It allows for creative solutions tailored to the specific circumstances of the company and its creditors. It reflects the principle that, in some cases, allowing a company to continue to operate or restructure its debts can be more beneficial for all parties involved than simply ceasing operations and liquidating assets.

Thank you so much for watching. Next time, we'll take you through a real-world case from Worrells, where we will talk about the DOCA proposal that saved an iconic cosmetic brand.