Australia: (Mighty) River Runs Dry: Australian High Court Rules "Holding" DOCAs Are Valid

Last Updated: 4 October 2018
Article by Lucas Wilk, Roger Dobson, Katie Higgins and Evan J. Sylwestrzak

In Short

The Situation: The statutory moratorium period for voluntary administrators to restructure an insolvent company often is too short to find a solution. Administrators frequently utilise "holding" deeds of company arrangement ("DOCAs") to extend the moratorium and "buy" time to investigate potential restructuring opportunities. A creditor challenged this practice by arguing that holding DOCAs are invalid.

The Question: Are holding DOCAs valid under the Corporations Act 2001(Cth)?

Looking Ahead: Holding DOCAs are permissible, but validity will turn on the circumstances in each case.

In Mighty River International Limited v Hughes [2018] HCA 38, the High Court of Australia recently affirmed the ability for an administrator to use a holding DOCA.

The case concerned the validity of a holding DOCA for Mesa Minerals Ltd ("Mesa"). Amongst other things, the DOCA provided for a moratorium on creditors' claims and required the deed administrators to conduct further investigations and report to creditors concerning possible variations to the DOCA within six months.

Mighty River International Ltd ("Mighty River") was a creditor of Mesa and intended to liquidate Mesa. Mighty River had previously sought to have the DOCA declared void in the Supreme Court of Western Australia and on appeal in the Western Australian Court of Appeal, but was unsuccessful in both instances. The factual background and the litigation history is set out in our previous Commentary, " Australian Court of Appeal Approves Use of "Holding" Deed of Company Arrangement".

High Court of Australia Appeal

Mighty River was granted special leave to appeal the Court of Appeal's decision to the High Court of Australia. Mighty River appealed on the following two grounds.

  • The Mesa DOCA was not valid as it sought to circumvent or sidestep the requirement in s 439A(6) of the Corporations Act 2001 (Cth) ("Act") for a court order extending the convening period during which a second meeting of creditors must be convened by an administrator and was contrary to the object of Pt 5.3A of the Act.
  • If the Mesa DOCA was a deed of company arrangement, then it should have been declared void as the DOCA did not comply with an alleged requirement in s 444A(4)(b) of the Act to distribute some property of Mesa. In oral submissions, Mighty River also submitted that the administrators failed to comply with s 438A and s 439A(4) with respect to the requirements for the second meeting of creditors.

Findings of the High Court

The majority of the Court (Kiefel CJ and Edelman J in a joint judgment, with Gageler J agreeing) held that a holding DOCA is consistent with the objects of Part 5.3A of the Act for the following reasons.

  • The operation of a holding DOCA is aimed at fulfilling the objects of Part 5.3A of the Act, which is concerned with maximising the chance of a company's survival or providing a better outcome to creditors than what would result from liquidation.
  • The history of schemes of arrangement shows that it is a valid purpose for the Mesa DOCA to provide for a moratorium on claims while the company's position is further assessed by the deed administrators. The effect of extending the time for investigations by the deed administrators was only incidental to the purpose of the Mesa DOCA.
  • The provision of a short convening period before the second creditors' meeting, thus reducing the period of the moratorium on claims under s 440D of the Act, is for the protection of creditors. The majority held that that speed and efficiency are not undermined if creditors subsequently enter into a DOCA to provide for a longer moratorium period than would otherwise have been the case.

The majority also found that s 444A(4)(b) of the Act does not require that a holding DOCA make any property of the company available for distribution to creditors. The majority held that s 444A(4)(b) requires the property to be divided into two sets: property that can and property that cannot be used to pay creditors' claims. The majority noted examples of when DOCAs may not involve any property being distributed to creditors—for instance, a debt of equity swap.

The majority also addressed Mighty River's submission that the administrators of Mesa failed to comply with s 438A and s 439A(4) of the Act. Under s 438A, the administrators were required to form an opinion as to whether it would be in the interests of Mesa's creditors: (i) to execute a DOCA; (ii) for the administration to end; or (iii) that MESA be wound up. Section 439A(4) concerns an administrator's report to creditors for the second meeting of creditors in which the administrator recommends a course of action to creditors. The majority held that the administrators did not contravene either section, as they expressed their opinion about the options available to creditors. Importantly, the administrators informed creditors of the benefits of entering a DOCA: that is, that it may result in a better outcome then immediate liquidation.

Two Key Takeaways

  1. Administrators can use "holding" DOCAs to gain more time to complete investigations and pursue possible options to secure the future of the company. However, the question of whether a particular DOCA is valid will turn on the circumstances in each case.
  2. A DOCA can be valid even if it does not result in any of the company's property being available for distribution to creditors. This means administrators continue to have a wide range of options available to them (such as debt for equity swaps for creditors) without needing to distribute some property, however nominal, to creditors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Corrs Chambers Westgarth
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Corrs Chambers Westgarth
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions