A business is a commercial entity setup and run by the people. Therefore, the identity of a business is different from its promoters and the law recognises it. In fact, many ups and downs in a business for some reasons or the other are quite natural. According to the UK law, Company Voluntary Arrangements (CVAS) are treated as an intermediary tool to run insolvent business enterprises in UK.
However, CVAS can come into effect after a consensus on it by all the directors, legal administrators or the appointed company liquidator. If you are a sole trader or a self-employed person, you too can take benefit here by applying for IVAS (Individual Voluntary Arrangements).
Who can implement CVAS?
Well, this is a valid question here. The process of implementing CVAS is a bit time taking and lengthy that critically involves a few steps such as the following.
- An insolvency practitioner first drafts the proposal for the voluntary arrangement of a company and then, sends it to the creditors of the company for their approval.
- A meeting is convened among the creditors to discuss and decide the fate of the said draft. The rule is that at least 75% of the creditors (based on the book value of the debt) must vote in favour of the draft proposal to be considered the same as approved and accepted by them. The terms and conditions laid out in the draft then becomes binding on all the creditors. In such a case, whether a creditor agrees or not, he/she cannot pursue further legal actions as long as the terms and conditions are not violated by the insolvent company.
A single payment is given to the insolvency practitioner on a monthly basis and the fee levied by the said practitioner is deducted from the payable monthly amount. It means the insolvent company doesn’t need to bear any extra cost and this payment system is followed till every creditor is paid off as per the agreed terms and conditions laid out in the approved proposal.
Benefits of CVAS:
- Implementation of the voluntary arrangements immediately improves cash flow in the system of the insolvent company.
- Directors of the insolvent company retain the control of business though they are required to prioritise interest of the creditors.
- It empowers the company to remove employees, managers, and directors that too without paying any redundant amount. The company can also withdraw any onerous contract with its suppliers here.
- All winding up petitions on the company stop while board and shareholders of the company remain in control. This, in other words, means the company can again start business operations.
- On the creditor’s part, they continue to receive their agreed dues over the time. Thus, they can also retain the customer.
Your company faces the voluntary liquidation if it fails to get 75% acceptance and approval of the draft proposal prepared by the insolvency practitioner. Failure to pay as per the agreed schedule will empower the creditors to push the winding up proceedings through the courts.
Therefore, you will contact CVAS that will help you to run your business in your difficult conditions. This really helps you to upgrade your company growth and assist you to return money to your creditors.