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  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