A voluntary arrangement for a company is a procedure whereby a company reaches an agreement with its creditors as a whole. There is limited involvement by the Court and the scheme is under the control of a supervisor.
A company voluntary arrangement is used to rescue companies which are insolvent yet have an underlying business that would be profitable in the future without having old debts holding it back.
A proposal is drawn up by the directors or if the company is in liquidation or administration, the liquidator or administrator. The proposal must name an Insolvency Practitioner who will act as nominee and will call meetings of the members and creditors.
The nominee also reports to the court on whether in his opinion a meeting of members and creditors should be called to enable them to consider the proposal, and whether the proposal has a reasonable prospect of being approved and implemented.
If the proposal is accepted, it is binding on all your creditors, including HM Revenue & Customs. In fact, acceptance is generally reached by a majority, in value, of 75% of those creditors who actually vote.
If needed, in advance of distributing a proposal, a court application can be made for a moratorium whereby it has a 28 day period of respite from its creditors during which proposals have to be made and put to creditors.
The sort of proposal put forward will generally include an agreement to pay so much in the £ to creditors over a specified period, usually up to 5 years, whilst paying all new debt as they fall due.