A company voluntary arrangement is ideal when a business is essentially sound and has the potential of operating profitably if its debt was taken away.
Usually, creditors will only agree to this kind of an arrangement if the returns they get are projected to be more than if the business was simply liquidated. To realize this, the business must be in a position where it is able to continue trading profitably if it is allowed to make new plans for repaying its debts.
Managers of the business could have considered other alternatives of rescuing their company such as the pre-pack administration. However, this alternative requires a cash amount to buy off the assets of the business. Quite often, such a huge amount can hardly be raised, considering the circumstances.
No cash is needed to apply for a company voluntary arrangement. Instead, the arrangement is funded by continued running of the business.
Trackback URL for this entry