|Article - Company|
Company Voluntary Arrangements: Small & Medium Sized Companies
I have a small company which has short term cash flow problems. The company needs its creditors to accept some delay in receiving payment. Is there anything that can be done?
you are liable to pay all creditors within their agreed credit terms, if
your underlying business is sound, you should consider reaching an
arrangement with your creditors where they are paid less than they are
owed, but the amount paid is more than those creditors would expect if
your company was wound up.
Insolvency Act 2000 introduced a mechanism for a company to obtain a
moratorium to enable it to put proposals for a company voluntary
arrangement to its creditors. The
effect of the moratorium is to prevent action being taken against the
company by any of its creditors whilst moratorium is in force.
In order to obtain the moratorium you must file at Court a copy of
the proposals for the company voluntary arrangement, a statement of
affairs of the company, a statement that the company is eligible and that
the proposed nominee has confirmed the proposal has a reasonable prospect
of being approved and implemented. A
moratorium will come into effect after these documents have been filed and
last for 28 days, although it may be extended for a further 2 month
the moratorium, the company continues under your managerial control and
can dispose of assets in the ordinary course of business.
Insolvency Act 2000 provided that moratoriums were only available for
'small companies'. In order to
be a small company, you have to satisfy at least two of the following
threshold of not more than 50 employees remains unchanged.
if your company is within the new thresholds for small companies you will
be able to obtain the benefit of a moratorium whilst putting proposals to
your creditors for a voluntary arrangement.
If you are thinking about going down this road, you should obtain the advice of an insolvency practitioner before doing so.
Article First Published: 7 March 2004
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