What you need to know
- In Australian Agricultural Opportunities Limited v Agripower Australia Limited [2026] FCA 777, the Federal Court terminated a DOCA under s 445D of the Corporations Act. The administrators' report failed to disclose that the director had been negotiating significant capital raising for months before the second creditors' meeting.
- The court found the omission was material and likely influenced how at least some of the creditors voted, satisfying s 445D(1)(c).
- The DOCA was also terminated under s 445D(1)(g), given the proponent director's self-interest in avoiding scrutiny, a de minimis contribution of AU$460,000 against ~AU$321 million in creditor claims, poor governance, and the availability of third-party funding for liquidator investigations.
What you need to do
- Disclose fully: Directors propounding a DOCA must ensure all material information, including restructuring plans and capital-raising negotiations, is disclosed to creditors. Silence at the creditors' meeting will compound the problem.
- Don't use a DOCA as a shield: A court may exercise its discretion to terminate a DOCA that insulates directors from investigation into insolvent trading, breach of duty, or voidable transactions and deprives creditors of potential recoveries from a liquidator pursuing such claims.
- Ensure a meaningful contribution: A contribution that is insubstantial relative to total creditor claims, especially if sourced from within the company's own group, will weigh against the DOCA's continuation.
- Note the public interest test: A DOCA that permits a likely insolvent company to continue trading under an unfit director may be terminated as contrary to the public interest.
- Creditors — consider funding investigations: Agripower confirms that a creditor's willingness to fund a liquidator's investigations into potential claims is a significant factor supporting termination of a DOCA in favour of liquidation.
"Directors’ DOCAs" – Duties, Disclosures and Contributions
Australian Agricultural Opportunities Limited v Agripower Australia Limited [2026] FCA 777 ("Agripower")
"The fact that the civil liability [for insolvent trading] is only enforceable in an insolvent winding up may lead the directors to 'cover' the liabilities [of the company] out of their own pockets in order to prevent a winding up in insolvency or to obtain the approval of creditors to an arrangement"; Harmer Report, para 288.
That is to say, one consequence of liability for insolvent trading only crystallising if the company is wound up in insolvency may be to encourage directors to appoint a voluntary administrator with a view to propounding a DOCA.
However, that circumstance does not obviate the need for creditors to be given sufficient information to enable them to make an informed decision as to whether their interests are better served by a DOCA rather than the company's liquidation.
That information may include:
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details of the arrangements which might be made to resuscitate the company's financial fortunes; as well as
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identification of the claims which may be brought by a liquidator both for breaches by directors of their duties (including the duty to prevent insolvent trading) and for the recovery of the benefit of antecedent transactions.
In Agripower, it appeared that some eight days after the second creditors' meeting, its shareholders were advised that the company was raising significant funds both by way of the issue of shares and by way of loan funds. That circumstance and the fact that negotiations for that financial support had been the subject of negotiations over some months was not disclosed in the report which the administrators had provided to creditors in advance of the second meeting of creditors.
Beyond that:
"There was also an enquiry at the second creditors' meeting about the chances of future funding; however, the creditors were not informed about the capital raising which had been undertaken by Agripower or the proposed extent of the capital raising. Notably, [the director] attended this meeting but said nothing in response to the query."; Agripower at [44].
The court in Agripower concluded:
"45 In these circumstances and assessed objectively, information about the ability or otherwise of Agripower to raise capital (and the extent of capital which it had been seeking to raise) is information of a kind that can reasonably be expected to have been material to creditors in deciding whether to vote in favour of executing a deed of company arrangement. …
46 That [the director] had (ostensibly) been discussing a significant investment with major Saudi Arabia investment funds during the nine months before the month in which the second creditors' meeting was held was information which was relevant to the assessment of the expected outcomes for creditors under the proposed DOCA and a liquidation scenario and, had that information been available, it might have affected the outcome. This constituted a further omission in the Report.
47 For these reasons I was satisfied there was at least one, if not two, omissions within the meaning of s 445D(1)(c) of the Corporations Act."
Beyond that circumstance, the administrators' report to creditors identified claims which might be made on account of:
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a breach of the directors' duty to prevent insolvent trading;
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voidable antecedent transactions; and
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breaches of the directors' statutory duties.
Having regard to those circumstances the court in Agripower concluded:
"55 It is contrary to the public interest that none of these prospective claims are investigated, particularly in circumstances where:
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[the director] stands to benefit if the DOCA shields him from scrutiny;
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the contribution amount of AU$460,000 is de minimis in relative terms to the AU$321,000,000 (approx.) in creditor claims. That proposition is fortified in circumstances where the funds have been sourced from within the Agripower Group, rather than a cash injection from a third party;
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third parties should not be exposed to a company trading with poor corporate governance;
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[a creditor] has put forward funds for investigations should a liquidator be appointed, and is willing to top up the funding if requested, subject to appropriate documentation and necessary internal (credit) approvals.
56 For these reasons, I was persuaded that the DOCA should be terminated for some other reason pursuant to s 445D(1)(g) of the Corporations Act."
For a DOCA to be terminated under s 445D of the Corporations Act not only is it necessary for the court to be satisfied that at least one of the grounds particularised in s 445D(1) of the Corporations Act has been established but that the court should also exercise its discretion to terminate a DOCA. The Court in Agripower, as to that matter, said:
"58… omitted information [from the administrators' report] was material and would likely have had an influence on the manner in which at least some of [the company's] creditors voted.
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60 … whilst a number of creditors supported the DOCA, a number of those are related parties.
61 … the creditors will be better off in liquidation, as will Agripower itself, because the company will no longer be under the control of [the director], who has demonstrated that he is not a fit person to act as a director. Further, a liquidator will be able to undertake investigations into insolvent trading and other claims, which investigations have been funded in part by [a creditor] and with the real prospect of a funding agreement being entered into between [that creditor] and the proposed liquidators…
62 … the continuation of the DOCA would have the effect of eroding commercial morality for the reasons explained above.
63 … the effect of the DOCA permits a company to continue to trade in circumstances where it is likely to be insolvent which is contrary to the public interest. …
64 … I am satisfied that the matters stated above which provide grounds for termination of the DOCA under s 445D of the Corporations Act also warrant the exercise of the Court's discretion to terminate the DOCA."
Authors: Carmen Boothman, Partner; Michael Sloan, Partner and Richard Fisher, Consultant.
