Company Voluntary Arrangement
When a potentially viable business finds itself in financial difficulty it is usually in everyone’s best interests to help – rescuing the company and allowing it to continue trading is far better than allowing it to go under. A Company Voluntary Arrangement is one way of doing this.
Clear your debts and continue trading
When a company is liquidated, it ceases to exist. This means that any employees lose their jobs and suppliers to the company lose a customer. Losing a customer can have a severe impact on a business and have a domino effect through the supply chain. This is avoided when circumstances allow a Company Voluntary Arrangement.
A Company Voluntary Arrangement relies on future profits to pay off current debts, so a proposal must be made to, and agreed by, creditors, which can include trade creditors, banks, HMRC and other unsecured creditors.
In certain circumstances, a Company Voluntary Arrangement is an excellent alternative to liquidation.
When is a Company Voluntary Arrangement appropriate?
When a business cannot pay its debts or meet other financial commitments, the first thought is usually to wind it up. However, if the business can put forward a recovery plan, showing what changes will be made, the financial structure, capital required etc, and how it can become profitable in the future, a Company Voluntary Arrangement can be proposed to creditors. A business must be insolvent, or virtually insolvent, for a Company Voluntary Agreement to be proposed.
How are debts repaid?
It is usual for debts to be repaid from future profits, although in some cases the sale of certain assets can generate some or all of the finance required.
It is not usually a requirement of a Company Voluntary Arrangement to pay back all of the money owed, but a percentage to each creditor. Once this percentage is paid, your debts are cleared.
A Company Voluntary Arrangement will last for a set, pre-agreed period, during which a court-appointed supervisor will oversee all aspects of the agreement, and at the end of which your debts will either be repaid or written off, depending on the terms of the agreement.
Help from DCO
If you are to consider a Company Voluntary Arrangement, you will need the help of a professional in this field, such as an insolvency practitioner or debt counsellor.
Debt Consolidation Online has helped many companies to stay in business through the use of a Company Voluntary Arrangement and we can offer expert advise on whether this is the best solution for your business.
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