Company Voluntary Arrangements

2008-01-09 12:41:44

( Entertainment )



What is A Company Voluntary Arrangement?

When a company is unable to service its debts, it usually has to allow the creditors to foreclose on the loans, or as last resort, file for bankruptcy.

But foreclosure and bankruptcy options may be also be counter-productive to a company which still has a high potential of restoring profitable operations if given a second chance. Hence, another alternative solution is a company voluntary arrangement, which restructures all the debts of the company. The company makes a deal to stretch loan deadlines to a future date and to pay part or all its loans in the process.

What are the Steps Involved in a Company Voluntary Arrangement?

You need to meet certain qualifications before your creditors accept your company voluntary arrangement. Your product and nature of business should still have a good potential of being profitable, given the fact that you have some form of relief from debts that eat up operating costs. You must be able to reintroduce more working capital that will enable you to recoup from cash flow problems. Your company also needs to cooperate with all your creditors in working out a feasible debt repayment scheme.

The directors of your company propose the company voluntary arrangement. When making the debt restructuring proposal, you need to show how each creditor will be repaid. Your proposal should also include forecasts which show that you can operate viably if given the chance to restructure your debts. You submit the proposal to a court which will then issue a notice to all your creditors.

All your creditors will meet in order to study your proposal and determine whether it is satisfactory. Once your creditors agree to your proposal, then they will allow you to continue your business operations. In some cases, they may also assign a representative to oversee your company.

Where to Get Help Regarding Company Voluntary Arrangements

Proposing a company voluntary arrangement is not an easy task. You need to do a lot of calculation and detailed planning to convince your creditors to see things your way.

You may want to secure the services of a financial adviser to assist you in preparing the proposal as well as to act on your behalf in filing your case in court and negotiating with your creditors.


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