developments in deeds of company arrangement - DibbsBarker

The Court was satisfied that Storm should be wound up on the grounds of insolvency, aswell as on the grounds that it was “just and equitable to do so”. The directors could notsatisfy the Court that it was in the best interests of the creditors to continue with theadministration and consider the DOCA.One important factor in the Court’s decision to grant the winding up application was thedetermination that the information memoranda distributed by Storm’s directors about theDOCA was misleading as to the rights and liabilities attendant on creditors under theproposed DOCA. In particular the directors proposed to establish a fund for creditorscontaining $2 million. The fund was, in actual fact, subject to Supreme Court litigationwhich meant that it may never have become available to the creditors.The Court held that the information memorandum “seriously misdescribes not only thecontingencies that attend the payment of the DOCA sum …but also the difficulties thatwill attend recovering monies for the benefit of creditors”. 17Where challenged proponents of a DOCA will need to provide sufficient evidence thatcontinued administration is in the best interests of the creditors to support theadjournment. 18 A Court will otherwise have the ability to scrutinise and rule on whether itis in the best interests of creditors to proceed with the administration or wind up thecompany. Where information made available to creditors is considered to be sufficientlymisleading the Court and indeed ASIC appear willing to intervene.17 Ibid [49].18 For further discussion see S Guthrie, A Hill et al., “An Imperfect Storm” (2009) 17 Insolvency LawJournal 36.11899717 v1 Brisbane 05 08 0918