Company Voluntary Arrangements
What Is A Company Voluntary Arrangement?
A Company Voluntary Arrangement is basically a deal between the company and is creditors which satisfies the company’s outstanding debts. The Company will usually make specific payments for a period of time after which its outstanding liabilities will be written off. The company is thus able to continue trading and creditors receive a greater dividend than if the company had simply been liquidated.
How Many Creditors Have To Agree?
The proposal for a Company Voluntary Arrangement is sent to all creditors and a meeting takes place at which the proposal is either agreed or rejected. To be agreed a majority of 75% by value of those creditors who vote is required. Creditors may vote either in person or by proxy and it is only the claims of those creditors who actually vote that are counted. Therefore if only a minority of creditors bother to vote but they vote in favour, the proposal for a Company Voluntary Arrangement is approved and is binding on all creditors, including the majority who did not vote.
Will I Have To Attend A Meeting Of Creditors?
It is a requirement for the company’s directors to attend the meeting of creditors at which the proposals for a Company Voluntary Arrangement will be considered. The Insolvency Practitioner acting as Nominee will chair the meeting although the directors may be called upon to answer any questions. It is often the case that creditors do not attend creditors meetings in person but submit proxy forms for the chairman to vote. If creditors do attend there are usually only one or two and therefore creditors meetings are nothing to worry about.
What Happens If The Company’s Circumstances Change?
The company is expected to honour its obligations under the Company Voluntary Arrangement. However, if the company’s circumstances materially change such that it can not honour its commitments, a further meeting of creditors could be convened at which the terms of the Arrangement could be modified. For a modification to be accepted a majority of 75% by value of those voting is required.
Can I Be Held Personally Liable For My Company’s Debts?
Unless you have given a specific personal guarantee, a director of a limited company in a Company Voluntary Arrangement you will not become liable for the company’s debts. The prospect of becoming personally liable as a result of committing offenses such as wrongful trading, preferences or transactions at an undervalue do not arise in a Company Voluntary Arrangement.
Can I start A New Company Using The Same or Similar Name?
Yes. Section 216 of the Insolvency Act 1986 which restricts the re-use of a company name or trading style only applies when the company is placed into liquidation. Directors of a company in Voluntary Arrangement will therefore be free to use the same or similar name for other business ventures.
Can I Still Be A Director Of Another Company?
Yes. The approval of a Company Voluntary Arrangement has no bearing on the your status as a director. No investigation will take place into the affairs of the company and the events leading up to the Voluntary Arrangement being proposed. No report is issued to the Secretary of State and therefore there is no prospect of a disqualification order being sought under the Company Director Disqualification Act 1986.