We are often asked how long does a company 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 increased creditor pressure and requires some breathing space to give time for a company rescue.
A company voluntary arrangement is a contractual voluntary arrangement between the business in company rescue and the creditors owed money at the time that the company voluntary arrangement is agreed.
Space for creditors
A company voluntary arrangement can be a very effective way of allowing some space for business restructuring and to bring about a business turnaround for a company that may have been facing too much pressure from its creditors and is considering how do you handle a cash flow shortage.
The company voluntary arrangement, once agreed by the requisite three quarters majority in value of creditors, is binding on all creditors. Unless the company voluntary arrangement fails, i.e. the business in company rescue fails to meet its obligations under the voluntary arrangement, then creditors are prevented from taking proceedings against that company for the debts that it is owed under the company voluntary arrangement.
No defined timeframe
Because a company voluntary arrangement is a contractual arrangement between all the parties, there is no defined time-frame during which the company voluntary arrangement needs to come to an end. Therefore when we are asked how long does a company voluntary arrangement last, the answer can be any time, as long as it is agreed between the company in company restructuring and its creditors, and it is generally a suitable time-frame for bringing around business turnaround and business recovery for the company in question. Anything too long will inevitably not work for the business turnaround or the creditors however. It must be a sensible length of time.
In order for the company voluntary arrangement to be valid, a supervisor is appointed over the voluntary arrangement who is an independent business rescue expert, who ensures that the terms of the company voluntary arrangement are adhered to. Because that business rescue expert is independent from the company in business recovery, they will bring about an end to the voluntary arrangement if the terms agreed under the business recovery arrangement fail to be complied with.
If you own a company and are considering using a company voluntary arrangement as a business recovery strategy, and would like advice on business recovery or company restructuring, then contact our expert team at Francis Wilks & Jones to discuss the best options for your business.