In the ensuing years, the UK holding company and the company’s engineer/inventor and directors had a severe falling out. Both parties, as well as a small number of external creditors, were owed significant monies pending development of the Diesel Fuel Injector Service (DFIS). The company became insolvent without the financial support of its UK holding company, and due to the concern of stakeholders, Pitcher Partners were appointed voluntary administrators with a view to preserving the assets, specifically the DFIS patents owned by the company.
As various parties were interested in acquiring the company and its patents, negotiations were commenced by Pitcher Partners with all stakeholders, including creditors, in order to maximise the return from the potential interest groups.
As a result, more than one viable Deed of Company Arrangement (DOCA) was proposed - any of which, if successfully completed, would be in the interest of the creditors, versus an immediate winding up of the company and liquidation of its assets.
As more than one DOCA proposal was realistically capable of meeting stakeholder expectations, a “cascading” DOCA was negotiated with the parties and approved by creditors. That is to say, an agreed order of staged performance of the DOCA requirements was given to the interested parties so that in the event that the first agreed party did not perform, the next priority party was given the opportunity to fulfil the terms of the DOCA.
As it turned out, the first priority party did not ultimately perform its agreed terms under the DOCA within the agreed time frame so the second priority party was then called upon and completed its agreed terms successfully acquiring the company and its assets, with creditors of the company receiving a substantive return, albeit less than 100 cents in the dollar, but substantially more than would have been achieved if the company had been immediately wound up.