Administration Order v Company Voluntary Arrangement - How your company can obtain a freeze on creditors actions

Company Voluntary Arrangements (CVA) versus Administration Orders

 

In insolvency situations there are two main ways in which your company might freeze its creditors. The first freezing method is to propose a CVA or Company Voluntary Arrangement. The second method of freezing your company's creditors enforcement actions is to place your company into Administration.

 

The new type of Company Voluntary Arrangement proposal (CVA) grants an immediate moratorium (freeze) period, which prevents creditors taking enforcement action in the period leading up to the creditors meeting. That type of Company Voluntary Arrangement (CVA) has many similarities with the impact of an administration order as such an order also creates an immediate moratorium or freezing period.

 

When would one or other creditor freezing route be followed?

 

1. Company Voluntary Arrangement

 

The new type of Company Voluntary Arrangement is only available to "small" companies. (The definition of a "small" company can be found by clicking here)

 

If the company is legally defined as defined as being "large" then to seek protection from creditors an administration order would have to be obtained.

 

It is possible that the thinking behind this is that only a large company could finance the cost of an administrator to run the affairs of the company - If indeed that is necessary. In most cases that we deal with the Administrator is in and out in one day through a Pre-Pack sale agreement - Often to a phoenix company owned by the same directors.

 

2. Administration Order

 

Both "small" and "large" companies can, however apply for an Administration order instead of a new type Company Voluntary Arrangement  with a moratorium. 

 

If you want to obtain advice how to freeze creditors of your company or to arrange a FREE INITIAL MEETING please contact Chris Parkman. He would explain to you the pros and cons of applying for an Administration as opposed to a Company Voluntary Arrangement by direct reference to the particular financial circumstances of your company.

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