Effect of company voluntary arrangement
When a company receives a winding up petition, it is possible to prevent closure of the business if a company voluntary arrangement is favoured by creditors. Oftentimes, tax and customs authorities are notorious for petitioning for winding up of companies. However, where there is the likelihood of agreeing a CVA, it may return a reasonable amount of the debt, and such authorities are usually supportive of such an arrangement.
In the face of economic meltdown when business is difficult and cash for investment is not easily available, company voluntary arrangements are more prevalent in a bid to rescuing troubled businesses.
A company voluntary arrangement is seen as appropriate for both a business and its creditors. While the creditors have the benefit of receiving a higher return than if the business was closed, the cash flow of the business receives a major boost since the amount of debt is drastically reduced.
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