The Good Place or the Bad Place: The Position of Directors during a Deed of Company Arrangement
(2018) 26 Insolv LJ 191
Posted: 9 Jul 2019 Last revised: 12 Jul 2019
Date Written: 2018
Directors are under constant pressure to remain mindful of their complex corporate governance responsibilities. The complexities directors face are heightened when the company is in financial distress, as the courts suggest that the directors’ duty to act in the best interests of the company includes having regard to the position of the creditors at such times. If the company is placed into a Pt 5.3A administration, then directors’ powers are suspended but they continue to owe the relevant duties. Should the administration result in a Deed of Company Arrangement (DoCA), matters become more complex still. The directors’ role is revived at the time that the DoCA takes effect, but significant questions remain as to how their powers may be exercised, to whom their duties are owed at this time, and the precise nature of the entity while under the DoCA. Although voluntary administration continues to be the third most utilised form of external administration behind court and creditor wind-ups respectively, the percentage of companies moving from administration into a DoCA has increased. This article examines the potential pitfalls to be considered when framing of a DoCA, the position of directors during the administration of the DoCA, the legal effect of the DoCA on the role of the creditors and the technical form of the company while under a DoCA.
Keywords: Directors, Corporate Governance, Deed of Company Arrangement, DoCA
JEL Classification: K1
Suggested Citation: Suggested Citation