• 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 because 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.

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