Company voluntary arrangements are something we regularly advise on.
What is a company voluntary arrangement?
A company voluntary arrangement is a flexible but binding contractual agreement between a company (often in business turnaround or as part of a company restructuring) and its creditors. A voluntary arrangement can be used by a company restructuring itself, as part of a business recovery strategy and company rescue. It is often used as a business restructuring tool to assist with business turnaround because one of the key advantages of the voluntary arrangement is that it takes pressure off a business turnaround situation from the threat of immediate proceedings by company creditors.
How long does a voluntary arrangement last?
A company voluntary arrangement is often used as part of a company restructuring or business restructuring strategy, in order to bring about business recovery for a company that may be facing increasing creditor pressure and requires breathing space to allow for a business turnaround and a company rescue.
A company voluntary arrangement can be a very effective tool in business restructuring to bring about a business turnaround for a company that has been experiencing increased creditor pressure and is looking at how do you handle a cash flow shortage.
- once agreed by the requisite three quarters majority in value of creditors, the company voluntary arrangement is binding on all creditors who could have voted at the time (whether they did or not).
- this has a key benefit in that the business recovery can then take place without the threat of legal proceedings being brought against the business by its creditors to date during the period of the voluntary arrangement.
Because a company voluntary arrangement is purely a contract between parties, there is no defined timeframe during which the voluntary arrangement lasts. Therefore, when we are asked how long does a company voluntary arrangement last, there is no specific answer. The time frame is however long is agreed between the company in company restructuring and its creditors. It must however be a practical time frame to bring about a business turnaround and business recovery for the company. Anything too long will inevitably be rejected by creditors and possibly the court, as being contrary to an effective business turnaround situation.
If you are a business owner looking at business recovery options and have considered a company voluntary arrangement as a business recovery strategy, contact our company voluntary arrangement experts at Francis Wilks & Jones for advice on business recovery and company restructuring to discuss whether a company voluntary arrangement is suitable for your business.