It is not uncommon for parties other than the company itself to propose a Deed of Company Arrangement (DOCA) to creditors.

Often when that happens, an attempt is made to get releases for parties other than the company, including the party proposing the DOCA.

Is it understandable that a party paying money into a DOCA fund would want a release from claim from creditors.

It has long been the law, however, that cannot happen and the matter of Eastmark Holdings Pty Ltd (receivers and managers appointed) (subject to a DOCA) and ors, Brereton J again confirmed that a DOCA cannot confer the benefit of the release on parties other than the company itself.

In the matter, the court did not set aside the whole DOCA, but declared the DOCA void to the extent the DOCA conferred releases upon other parties, particularly;

1. The administrators and deed administrators of the companies; and
2. The receivers of the companies; and
3. The senior creditors of the companies.

The decision is consistent with past authorities and serves as a useful reminder as to the limitations on the commercial benefits that a DOCA is able to confer on parties other than the company itself.

For more information concerning Deeds of Company Arrangement, please contact ERA Legal.