Company Voluntary Arrangement: Moratorium

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.

Please note that the above is provided for illustration purposes only and comprises a short view of extremely complex insolvency and other legislation. This is a complicated area and specific advice must be sought before undertaking any course of action or before refraining from any course of action. Gore and Company takes no responsibility for any loss incurred to or by any person who either acts or refrains from acting on the basis of the above or of any other item published on this website. The above note may not be reproduced without the prior written consent of Gore and Company.

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