Deed of Company Arrangement
A Deed of Company Arrangement is the mechanism under the Voluntary Administration regime, which allows for a company to enter into a compromise arrangement with its creditors. The arrangement can take many forms and may include the following:
- The continuation of the company’s business or part thereof with responsibility for trading resting with either the Directors or the Deed Administrator.
- The injection of capital or the sale of certain assets.
- The payment to creditors of a fixed sum, or specified rate in the dollar or a percentage of profits payable in a lump sum or by way of instalments over a period of time.
The passing of the resolution to accept a Deed binds all unsecured creditors, even if they did not vote in favour. Secured creditors, owners and lessors of property will only be bound if they vote in favour. The Administrator usually becomes the Deed Administrator, however creditors can resolve to appoint an alternate Deed Administrator.
If the company defaults on the terms of the Deed, the Deed Administrator may call a meeting of creditors to terminate the Deed and place the company into liquidation. Conversely, where the company satisfies all of the requirements of the Deed, it will no longer be subject to administration.
The above information is by necessity, general in nature and its brevity could lead to misunderstanding. For further information, you are invited to contact O’Brien Palmer.