In order to progress with a company voluntary arrangement a company will need to liaise with a licensed insolvency practitioner to ask them to become a nominee of the company voluntary arrangement and, if it is later approved, to be the trustee of the arrangement.
The nominee will have to consider the merits of the company voluntary arrangement proposal and is required to prepare a report to court to say whether or not they believe the proposal is likely to succeed. It is therefore vital that the nominee has as much relevant information as possible in order to make the best possible recommendation.
What does the nominee need to tell the court?
They must report on accuracy of the company’s financial position.
The nominee will also need to consider and report on whether the voluntary arrangement is fair on creditors of the company. They will need to have enough information to say whether it has a reasonable prospect of success if it is approved by the creditors.
What information is required from the company?
The company will need to:
- propose the terms to be included in the voluntary arrangement, based on a realistic repayment plan. Anything that may be overstretching and unrealistic should be avoided;
- draft a statement of the company’s affairs – to include all company information;
- provide a realistic business plan including cashflow and profit and loss forecasts for the company so the nominee and creditors can assess the viability of the company going forward. An independent business review of the company would be ideal for this purpose;
- provide details of all the creditors of the company including future potential creditors;
- provide details of how the company intends to honour the voluntary arrangement proposals going forward, including any third party funds available, the role of key employees and directors, whether other restructuring tools are intended to be too?
- details of all of the company’s assets including the values of those assets and whether there is any retention of title over stock etc. or secured credit over assets. All loans and guarantees should be notified to the nominee.
The above is not an exhaustive list, and all information regarding the company both past and present should be provided to the nominee so that they can have a realistic discussion with the directors about the viability of a proposed company voluntary arrangement.
If you are considering using a company voluntary arrangement as a useful restructuring tool for your company, speak to our company voluntary arrangement experts today to discuss the realistic prospects of success of a company voluntary arrangement and how to take a proposal forward.