By ADAM BROWN, Managing Director, Axia Litigation Lawyers – 17th September 2025

When a business faces serious financial pressure, liquidation often feels like the only option. However, Australian insolvency law provides another pathway that can give struggling companies a chance to recover. One such option is a Deed of Company Arrangement (DOCA), which allows a business to restructure its debts and continue trading while offering creditors a better outcome than liquidation.

A Deed of Company Arrangement (DOCA) is a formal agreement between a company and its creditors that sets out how outstanding debts will be dealt with. It is designed to give businesses in financial distress a chance to restructure, continue trading, and deliver a better return to creditors than liquidation.

Here’s how the process works.

The administrator collects key records, including:

• Financial statements, bank records, contracts, and tax lodgements
• Claims lodged by creditors
• Details of liabilities, assets, trading income, and cash flow

They also liaise with creditors to confirm the extent of secured and unsecured debt, along with any personal guarantees given by directors.

Next, the administrator analyses whether the company can realistically continue to trade at a profit if restructured. This includes:

• Identifying whether parts of the business or specific assets could be sold to reduce debt
• Reviewing the condition of contracts, supplier relationships, or licences essential to ongoing operations

The administrator also looks for:

• Voidable transactions, such as unfair preferences, uncommercial dealings, or related-party transactions that may be recoverable for creditors
• Breaches of directors’ duties or insolvent trading claims that could increase the pool of recoveries

Finally, the administrator estimates the return to creditors under different scenarios:

• Return the company to directors’ control – typically recommended if solvency can be restored quickly without ongoing oversight
• Enter into a DOCA – recommended if a repayment or restructure plan will deliver better returns than liquidation
• Close and liquidate – recommended if the business is not viable and liquidation offers the best return to creditors

If the administrator proposes a DOCA, creditors vote on it at a meeting. For the DOCA to be accepted:

• More than half the creditors by number must vote in favour; and
• Those voting “yes” must also represent at least half of the total debt by dollar value.

Once approved, the DOCA becomes legally binding on all unsecured creditors (and in some cases, secured creditors). The arrangement may involve staged payments, asset sales, or other measures that improve returns while allowing the business to continue operating.

For a DOCA proposal to succeed, creditors must be convinced it offers them a better outcome than liquidation. The following practical steps can significantly improve the likelihood of creditor approval.

• Engage insolvency lawyers and an insolvency practitioner before administration begins.
• Maintain contact with creditors rather than letting debts linger unaddressed.
• Prepare a draft DOCA concept as early as possible.
• Provide full disclosure to the administrator — transparency builds trust.

Creditors will only approve a DOCA if it provides a clear financial advantage. Work with the administrator to prepare a comparative return analysis that shows actual dollar amounts rather than vague projections.

If the DOCA relies on lump-sum or staged payments, provide evidence of funding. This may include finance approvals, signed asset sale contracts, or confirmed director/shareholder contributions. The more certainty provided, the less risk creditors perceive.

Identify major creditors early, especially secured parties. Engage with them before the vote, listen to their concerns, and, where possible, reflect their interests in the proposal.

Sweeteners can tip the balance. These may include:

• Upfront lump-sum payments
• Accelerated payments for certain creditor groups
• Commitments to ongoing supplier relationships that offer long-term value

Complex, risky, or overly optimistic plans are less likely to gain support. A straightforward, realistic DOCA that can be delivered in full will maintain credibility with both creditors and the market.

Although impartial, administrators strongly influence voting. Providing complete and verifiable information makes them more likely to recommend the DOCA over liquidation.

A DOCA proposal should be more than legally compliant. It should also be strategic, evidence-based, and transparent. Clear communication, financial credibility, and early engagement with creditors often determine whether the plan succeeds.

* This information is general guidance only and not legal advice. You should obtain tailored legal advice before acting on any insolvency option, including a DOCA.