DOCA or liquidation: what the difference means for creditors and directors

Both a deed of company arrangement and a liquidation are decided by creditors at the same meeting, at the end of a voluntary administration. A deed keeps the company alive and pays creditors under agreed terms. A liquidation ends the company: the assets are sold, creditors are paid in the order the law sets, and the company is deregistered. Creditors choose a deed when it offers them more than winding up would.

The same decision, two outcomes

At the second creditors’ meeting in a voluntary administration, creditors have three choices: hand the company back to its directors, accept a deed of company arrangement, or wind the company up. The administrator reports on each, including an opinion on which is in creditors’ interests.

That report is the heart of the decision. A deed has to be measured against what creditors would receive in a liquidation, which is why a realistic estimate of the liquidation return matters as much as the offer itself.

DOCA compared with liquidation

What creditors actually receive

In a liquidation, creditors are paid in a fixed order: the costs and fees of the liquidation, then employee wages and superannuation, then leave, then retrenchment pay, and only then unsecured creditors. Each category must be paid in full before the next receives anything, which is why unsecured creditors often receive little or nothing.

A deed is not bound by that order in the same way, though employee entitlements keep their priority unless eligible employees agree otherwise. That flexibility is what allows a deed to offer unsecured creditors a better return than a winding up, and it is the reason creditors accept one.

Where directors stand

Under a deed, the company continues and the directors generally return to running it, subject to the deed’s terms. Under a liquidation, their powers end and they must help the liquidator, who investigates what happened.

Neither outcome deals with a director’s own liabilities. Personal guarantees survive both, and so does a director penalty, although a deed that pays the underlying tax can reduce that exposure. If a director cannot meet those personal debts, the questions move to the personal side: see liquidation vs bankruptcy.

What happens if a deed fails

If creditors accept a deed and the company does not sign it within 15 business days of the meeting, the company goes into liquidation automatically, with the administrator becoming liquidator. The same happens if the deed is later terminated by the court. A deed that cannot realistically be performed therefore only delays a winding up, and adds cost on the way.

How Greengate Advisory can help

Our registered liquidators act as administrators, deed administrators and liquidators. If you are a director considering a deed, we can tell you whether an offer is likely to be accepted before it is put to creditors. If you are a creditor weighing one up, we can explain what the comparison with liquidation really shows. The first consultation is free and confidential.

Common questions

What is the difference between a DOCA and liquidation?

A deed of company arrangement keeps the company alive and pays creditors under agreed terms. A liquidation winds the company up, sells its assets, pays creditors in the statutory order and ends with deregistration.

Who decides between a DOCA and liquidation?

Creditors do, at the second meeting in a voluntary administration. The administrator reports on the options and gives an opinion on which is in creditors’ interests.

Is a DOCA better than liquidation for creditors?

Only if it returns more than a winding up would. That comparison is the test creditors apply, and it is why the estimated liquidation return matters as much as the offer.

Does a DOCA bind creditors who voted against it?

Yes. All creditors with admissible claims are bound, including those who voted against it. Secured creditors keep their security unless they agree otherwise.

What happens if the company does not sign the deed?

If the company does not execute the deed within 15 business days of the creditors’ meeting, unless the court allows longer, it goes into liquidation automatically and the administrator becomes the liquidator.

Do directors get the company back under a DOCA?

Usually yes, subject to the deed’s terms, since the company continues to exist. In a liquidation the directors’ powers end.

Does a DOCA stop a liquidator investigating the directors?

Largely, because a deed usually ends the detailed investigation a liquidator would otherwise carry out. That is one of the reasons creditors scrutinise what a deed offers.

This page is general information, not advice about your situation. Sources: ASIC Voluntary administration: a guide for creditors and Liquidation: a guide for creditors. Checked 29 September 2026.