When Can Creditors Challenge a DOCA? Lessons from Recent Federal Court Decisions

A deed of company arrangement (DOCA) may offer creditors a better or more timely return than liquidation, but it remains subject to Court scrutiny. Three recent Federal Court decisions highlight when a DOCA may be terminated, when creditor challenges are unlikely to succeed and what creditors should consider before and after a DOCA takes effect.

The decisions confirm that courts will look beyond the proposed dividend and examine whether creditors received adequate information, whether the arrangement has genuine commercial substance and whether the DOCA is being performed as intended.

The Court’s power

Section 445D of the Corporations Act 2001 (Cth) gives the Court power to terminate a DOCA in a range of circumstances, including where:

• ss445D(1)(a)-(c) - false or misleading information, or a material omission from information provided to creditors before the vote;
• s445D(1)(d) - a material contravention of the DOCA by a person bound by it;
• s445D(1)(e) - the DOCA cannot be given effect without injustice or undue delay;
• s445D(1)(f) - the DOCA is oppressive, unfairly prejudicial or unfairly discriminatory against creditors, or contrary to the interests of creditors as a whole; and
• s445D(1)(g) - the DOCA should be terminated for some other reason.

A creditor or another interested person may apply under s445D(2). Importantly, establishing a statutory ground does not compel termination. The Court must then decide whether, in the circumstances, the discretion to terminate should be exercised.

Material omissions and the public interest

In Australian Agricultural Opportunities Limited v Agripower Australia Limited (subject to deed of company arrangement) [2026] FCA 777 (Agripower), the Court terminated the DOCA under ss445D(1)(c) and (g).

The Court’s reasoning focused on both the information available to creditors when they voted and the consequences of allowing the DOCA to remain in place, finding that:

• The administrators' report to creditors contained material omissions, including the absence of an independent valuation of the group's mining tenements and the failure to disclose significant capital-raising discussions. Those matters were capable of affecting how creditors assessed the DOCA against liquidation and satisfied s445D(1)(c).[1]
• The DOCA would prevent the investigation of potential insolvent trading, directors' duties and voidable transaction claims, while the proposed contribution of approximately $460,000 was de minimis against approximately $321 million in creditor claims.[2] The Court therefore also relied on s445D(1)(g).

In exercising its discretion to terminate the DOCA, the Court considered the materiality of the omitted information, the availability of creditor funding for liquidator investigations and the public interest in investigating potential misconduct.

Unsuccessful creditor challenges

Stelamar LLC v Soar.Earth Limited (Subject to Deed of Company Arrangement) (No 2) [2026] FCA 1318 (Soar.Earth) provides a useful counterpoint to Agripower. The plaintiffs sought to terminate the DOCA, contending, among other things, that the creditors had been provided with inadequate or misleading information and that the DOCA was unfairly prejudicial or discriminatory. The Court rejected those challenges, with two aspects of its reasoning being particularly significant:

• In contrast to Agripower, the absence of an intellectual property valuation did not amount to a material omission or misleading information for the purposes of ss445D(1)(a)-(c). The administrators had made reasonable efforts to obtain a valuation within the compressed voluntary administration timetable and had disclosed to the creditors that the value remained to be determined.[3]
• The Court also rejected the plaintiffs’ reliance on ss445D(1)(e), (f) and (g) arising from the differential treatment of creditors under the DOCA. In doing so, Jackman J adopted the Full Court’s reasoning in Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) v Canstruct Pty Ltd [2024] FCAFC 141 that the mere fact that a creditor is prejudiced by a DOCA is not sufficient to justify termination. For the purposes of s445D(1)(f)(i), the discrimination or prejudice must be unfair in the circumstances, with the likely outcome for the affected creditor in a winding up being a relevant consideration.[4]

As no statutory ground for termination was established, the question whether the Court should exercise its discretion to terminate the DOCA did not arise.

Material default

Deputy Commissioner of Taxation v McCabe, in the matter of Adcon VIC Pty Ltd (administrators appointed) [2026] FCA 395 (Adcon) concerned a DOCA entered into by Adcon and two related companies. The decision illustrates how s445D may operate where a material default occurs after a DOCA has been implemented. The Court’s reasoning centred on the failure to make the promised deed contributions:

• The pooled DOCA required the deed proponent to contribute $5 million by way of eight quarterly instalments of $625,000. After instalments fell into default, the Court held that the failure to make the required payments was a material contravention under s445D(1)(d). The contribution was central to the DOCA and the breach was sufficient to justify termination.[5]
• The Court also observed that continuation of the DOCA would impede investigations and possible recovery actions that could be pursued by liquidators.[6]

The Court exercised its discretion to terminate the DOCA and ordered Adcon VIC Pty Ltd and the two related companies to be wound up.

Implications

For creditors, early scrutiny of the administrators' report and proposed deed fund can materially affect both voting strategy and subsequent recovery options.

For insolvency practitioners, the cases highlight the need to identify and address matters that may materially influence the vote, particularly where valuations are incomplete, liquidation recoveries are uncertain or creditors are to be treated differently under the DOCA.

[1] See Australian Agricultural Opportunities Limited v Agripower Australia Limited (subject to deed of company arrangement) [2026] FCA 777 at [35]-[47].

[2] Ibid at [48]-[56].

[3] Stelamar LLC v Soar.Earth Limited (Subject to Deed of Company Arrangement) (No 2) [2026] FCA 1318 at [36], [41]-[50].

[4] Ibid at [53]-[54], citing Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) v Canstruct Pty Ltd [2024] FCAFC 141 at [153]-[156].

[5] See Deputy Commissioner of Taxation v McCabe, in the matter of Adcon VIC Pty Ltd (administrators appointed) [2026] FCA 395 at [20(d)], [22], [29].

[6] Ibid at [30]-[31].