Administration

What is a deed of company arrangement?

A deed of company arrangement is a legal agreement of compromise by which creditors allow directors to regain control of a company that has been in voluntary administration.

The reason creditors agree to a deed of company arrangement is that they believe it will deliver them a higher return than if they put the company into liquidation.

However, the directors aren’t given full control of the company; instead, they have to follow the conditions laid out in the deed of company arrangement. The deed of company arrangement will state:

  • How much money the company will repay to creditors
  • Which assets it will use to repay creditors
  • How regularly it will make repayments
  • How large these instalments will be
  • The order in which creditors will be paid
  • The potential consequences of violating the deed of company arrangement

A deed of company arrangement is overseen by a deed administrator. The deed administrator is usually the same person who acted as voluntary administrator.

If creditors vote for a deed of company arrangement, the company must sign it within 15 business days – otherwise, the company will be put into liquidation. Once a deed of company arrangement is signed, it is binding on:

  • The company
  • The voluntary administrator
  • The directors
  • Secured creditors who voted in favour of the deed of company arrangement
  • All unsecured creditors (even if they voted against the deed of company arrangement)

During a deed of company arrangement, directors must notify the deed administrator if they believe a violation has occurred or is likely to occur.