Can I Enforce a Personal Guarantee if there is a Deed of Company Arrangement in Place?

If a company that owes you money goes into voluntary administration, you may still be able to have your debt repaid. The circumstances in which you can recover money owing to you, and the amount you may be entitled to receive, depends on binding arrangements like a Deed of Company Arrangement or whether you have a personal guarantee with a company director.

What is a Deed of Company Arrangement (DOCA)?

A DOCA is often created when a company enters voluntary administration. It is an agreement that outlines how the company and its creditors will operate. The main intention of a DOCA is to give the business the best chance of survival and to ensure creditors receive the maximum return possible.

A meeting is held between the company and its creditors to agree on the terms of the DOCA. If an agreement is not reached within a certain time frame then the company will go into liquidation. Even if a creditor doesn’t vote for the DOCA at the creditor’s meeting they will still be bound by it, as will anyone who owns or leases the business’ property.

If you’re asked to vote on a DOCA it’s a good idea to speak to your legal advisor to make sure you understand what the implications will be for you.

I have a personal guarantee from a director - am I bound by the DOCA?

If a company goes into voluntary administration and you have been given a personal guarantee by one of its directors, you will be unable to enforce that guarantee until a DOCA is in place. Once there is a DOCA in place you may be able to enforce the personal guarantee and have your debt repaid. Speak to your legal advisor to determine the best way to do this.

How do I get money owing to me under a DOCA?

If you are owed money by a company that has a DOCA you will need to show proof of the debt. This may include providing invoices, purchase or service contracts and any other supporting documents that you may have. You may also be required to complete a claim form.

To find out how to claim money owed to you by a company in voluntary administration speak to PMF Legal.