CCS Pty Ltd (CCS) entered Voluntary Administration on 19/6/18.
On 16/7/18, the Administrators issued their second report to creditors, recommending that creditors vote in favour of the Deed of Company Arrangement (DOCA) proposal.
Read more about what DOCA’s are here: HDOCA’s are valid, here’s why
The DOCA Proposal
The DOCA terms proposed to creditors:
- said that the monies payable to the Deed Fund (the fund of monies contributed by the Deed Proponent for the benefit of creditors) were payable as follows: (a) $100k upon execution of the DOCA Deed; and (b) $10k x 12 equal monthly instalments thereafter;
- did not say when the DOCA had to actually be executed; and
- did not say that it was a condition of the DOCA that the initial $100k had to be paid exactly when due.
On 24/7/18, at a meeting of creditors, it was resolved that CCS execute a DOCA Deed upon the terms of the DOCA proposal.
This didn’t exactly happen …
The DOCA Deed
The DOCA instead provided that the:
- $100k initial contribution was a condition precedent; and
- DOCA Deed had to be executed within 15 days [NOT 15 BUSINESS DAYS]
This final point is important because s 444B(2) of the Corporations Act 2001 (Cth) (the Act) allows 15 business days.
Also, the fact that the proposal and DOCA Deed were materially different is a very important lesson for my legal colleagues!!
Back to the story
On 14/8/18, CCS executed the DOCA. This meant CCS was within the 15 business days rule, but 6 days late under the 15 days clause.
On 16/8/18, full payment of the initial $100k was finally made. Ie 2 days late (per the terms of the DOCA Deed).
Were the 2 and 6 days late issues enough to render the DOCA void? Those who read my recent article does 8 minutes late render the DOCA void might already know the answer.
The WA Supreme Court (in Re CCS Equipment Pty Ltd [2019] WASC 431) applied s447A of the Act to amend the terms of the DOCA Deed to be in line with the DOCA proposal – as this is what creditors had voted for. This meant that CCS was never 2 and 6 days late, and therefore, the DOCA was not void.
#SVVoidables #law #insolvency
