The legislation makes it easier for a small company in financial difficulty to make a voluntary arrangement with its creditors by protecting the company from its creditors, by way of a short moratorium, to give the firm's directors time to put a rescue plan to creditors.
The directors may obtain a moratorium for the company where they intend to propose a Company Voluntary Arrangement ("CVA") to the company's creditors. The moratorium is not available otherwise.
The directors must be sure that the CVA has a reasonable prospect of being accepted by a meeting of the company's creditors and members which will need to be held within 28 days (unless extended) of the date the moratorium is obtained.
A company is eligible for a moratorium provided that it has a turnover of less than £2.8m, it has a balance sheet total of less than £1.4m and it has less than 50 employees. The company must satisfy two of these three conditions. There are also other conditions that preclude a company that, in very broad terms, is not undergoing and has not undergone a formal insolvency procedure.
Directors should always consult a Licensed Insolvency Practitioner as soon as they become aware that their business is in financial difficulty. Gore and Company can help in a variety of ways:
1. We can complete a rapid review of the business and advise on the most appropriate course of action
2. We can act as Nominee and Supervisors of a voluntary arrangement and help directors to develop rescue proposals
A corporate voluntary arrangement would enable the directors to remain in control of the company whilst implementing a scheme to enable creditors to be paid a proportion of what they are owed. Gore and Company works with companies to help them devise schemes to save their businesses and deal with the claims of creditors.