One option available to directors of a company is to place it into Voluntary Administration for the purposes of entering into a Deed of Company Arrangement ('DOCA').
The success to date of the Voluntary Administration regime is testament to the fact that it is fast and flexible and can provide solutions which are not possible or practical under other forms of external administration.
In simple terms, a DOCA is a binding agreement between the company and its creditors which sets out how the creditors are to be paid (in whole or in part), and how the company is to be released from the claims of the creditors.
The precise workings will vary between DOCAs. It may involve the realisation of all assets, a compromise of all or some creditors' claims, the injection of new funds/equity for distribution to creditors, or a combination of such options. Ultimately, it is a flexible mechanism to enable an orderly resolution of the company's insolvency problem.
A DOCA does not require Court approval and may be agreed to by a majority in number and value at a meeting held during the Voluntary Administration. Where a DOCA is agreed to by the creditors, the Voluntary Administrator usually becomes the Deed Administrator.
The passing of the resolution to accept a DOCA binds all unsecured creditors, even if they did not vote in favour. Secured creditors, and owners of assets will only be bound if they voted in favour of the DOCA.
If the company defaults on the terms of the DOCA, the Deed Administrator may call a meeting of creditors to terminate the DOCA and place the company into Creditors' Voluntary Liquidation.
Where the company satisfies all of the requirements of the DOCA, it will be released from the DOCA, handed back to its directors and it will no longer be subject to any formal insolvency administration (unless the DOCA specifies that the company is to be placed into Liquidation).