How to Organise a company Voluntary Arrangement

During the difficult economic times, a lot of businesses have fallen into financial trouble. Debts have spiralled out of control and a lot of companies have become insolvent.iva

When dealing with insolvency, which is the inability to pay back the debts of a company, an option is a company voluntary arrangement. It is an agreement between a company and its creditors. The arrangement agrees to pay back these creditors from future profits or from the proceeds of sold assets.

A typical voluntary arrangement is based on the aim to preserve a company, keep cashflow going, build up sales and profits and then commit to paying off a certain amount to creditors at regular intervals.

This arrangement can be a great solution for companies that can see them able to rebuild their finances, pay off spiralling debts and get their company back on track.

However, a company voluntary arrangement needs to be assessed on a number of elements about the company that will make sure an arrangement is successful. A company that is capable of successfully committing to this type of arrangement must have the following components.

A company must show they can return profitability. Creditors are not going to agree to take payment from future profits if these profits are unlikely to occur.

The company basically has to accept that there needs to be a change in the management of the company and its debts. The way the company has been working in the past has not worked and creditors need to see that some effort has been put in to implement future changes.