Voluntary Administration (VA) is a process by which an insolvent company is placed into the hands of an independent person – a Voluntary Administrator – who assesses available options to ensure the best outcome for the company’s directors and creditors.
The process helps the company to continue to operate in business. If this isn’t possible, it helps creditors to achieve a greater return than if the business was liquidated.
A VA is generally instigated when the directors of a distressed company suspect the company is insolvent, or is likely to become insolvent. It is designed to avoid the involvement of the Courts.
Another reason for instigating a VA might be a need to freeze creditors’ claims to allow time to reduce outstanding debt and to rebuild sales and profits.
Once this decision has been made, a VA appointment immediately suspends the majority of creditors’ claims against the company. The next step is for the directors to work with the voluntary administrator on a proposal to achieve an outcome for the company’s future.
The proposal is presented to creditors at a meeting in the form of a Deed of Company Arrangement and provides information on how the company will operate, what assets will be sold or retained and how the creditors will be paid.
WAIS’s corporate insolvency specialists have vast experience working with clients on VAs and have assisted many directors and companies avoid liquidation.
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