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PKF Australia

Accountants and Business Advisers

Let’s fix the problem now, not defer it: how a Holding DOCA can help

Let’s fix the problem now, not defer it: how a Holding DOCA can help

 

Current Environment  

Almost no organisation has ever dealt with the outbreak of a new virus like COVID-19 (coronavirus) and the adverse impact it can have on businesses including employee health and their families, potentially contaminated workplace facilities, supply chain disruptions and other facets of business operations. 

Many businesses run into difficulties from time to time, but COVID-19 has led to unprecedented problems for almost all businesses. Not just the unknown extent and duration of the restrictions being applied but also the degree and timing of government assistance to be offered. 

The Government has announced measures to stop enforcement of creditor claims, including the enforcement by landlords, but bear in mind that existing liabilities and loans from government will still need to be paid and the moratorium will not last forever. 

Thus, business owners and company directors should consider attending to any underlying financial problems now, not defer it until later! 

Directors should be mindful of the various options available to them that include the under-utilised Holding DOCA.  

What is a Holding DOCA?

The courts have approved contractually binding agreements where a company and its creditors agree to a moratorium for an extended period by executing a suitably formed Deed of Company Arrangement (DOCA). This is referred to as a Holding DOCA.   

In the current business environment, giving a company an extended period of time to resolve the myriad of issues will allow for a restructuring proposal to be formulated and agreed by creditors which should result in a better outcome than either an immediate winding up or a later winding up because directors left it all too late. 

Requirements of a Holding DOCA 

The terms of a Holding DOCA typically include the following: 

  • Provision of sufficient information to the Administrator to enable an opinion to be expressed that the Holding DOCA is in the best interests ofcreditors;  
  • Management of the business and company being handed back to the directorswith strict oversight by the Administrator; 
  • Disclosure of the Company’s assets and liabilitiesto all stakeholders; 
  • Moratorium on creditor claims for a defined period; and
  • Interim reporting to creditors by the Deed Administrator.  

A Holding DOCA provides flexibility and time whilst also maintaining the benefit of moratorium during a time of uncertainty.    

 

How we can help   

Every business situation is different and not every option may be available to a company in these unusual business circumstances.  

Running a business with the uncertainty of how long this will continue is a big challenge. Our specialist team is continuously monitoring the situation and is ready to help you and your clients at any time.  

If you need any assistance including discussing available options, please feel free to get in touch with any of our partners by email or phone. 


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