If the company’s circumstances are right, particularly where an underlying viable business is experienced short term financial difficulties, a voluntary arrangement may provide the valuable breathing space necessary in order to turn the finances around.
An arrangement can enable a company to avoid the consequences of liquidation or receivership by allowing trade to continue through a managed process thus returning to the creditors a greater return and saving jobs.
Should we determine a CVA is appropriate for your company we will guide you through the procedure and assist in the formation and drafting of proposals which are to be presented to the company’s creditors. Where appropriate we will consult with other interested parties including government departments, lenders and major creditors to seek their views and requirements for a successful solution.
For more information or to arrange your initial free consultation please telephone Mark Botwood on (01902) 393007.
Do all the company’s creditors have to agree to the proposals?
Every creditor receiving notice of the creditors meeting is entitled to vote at that meeting. This is particularly important as only those creditors notified and entitled to vote at the meeting are bound by the arrangement. This does not mean however all creditors notified and entitled to vote must vote in favour of the arrangement. Acceptance of the proposal or modifications of the proposal require in excess of a 75% majority in value of the creditors present in person or by proxy and voting on the resolution.
Is the company protected from creditor actions?
Every creditor receiving notice of the creditors meeting is entitled to vote at that meeting. This is particularly important as only those creditors notified and entitled to vote at the meeting are bound by the arrangement. If some creditors do not receive notice at all or receive inadequate notice then they maybe free to take enforcement action against the company and petition for the company to be wound up. In addition new credit enjoyed by the company during the arrangement is not protected under the arrangement and therefore again such creditors are free to take their own enforcement action.
What restrictions are placed on the company?
The arrangement is effectively a contract between the company and its creditors bound under the arrangement. The terms and conditions placed within the arrangement are agreed both by the company and its creditors and therefore the company is only restricted to the extent the terms are contravened.
How long will the arrangement last?
The circumstances of the company and the causes of the company’s difficulties will determine the proposed length of the arrangement although ultimately it is for the creditors to decide whether the length is suitable or not. There is no minimum or maximum period of time although 5 years is probably most common.