The term voluntary arrangement describes the process by which an individual, a partnership or a company comes to a formal agreement with their creditors to pay back a proportion of the liability owed, over a period of time.

The individual voluntary arrangement is well utilised and quite well known, and this year for instance some forty thousand people will opt to enter such an arrangement.

A partnership voluntary arrangement is much less utilised, due in part to the limited number of partnerships, and the costs involved in setting up one combined usually with IVA's for each partner.

A company voluntary arrangement is utilised where the company can trade effectively but merely has some cash flow issues which mean that it cannot pay all its creditors as and when they fall due.

The voluntary arrangement is begun by the debtor making a proposal to its creditors. This is quite a complicated document and therefore it is usually put together by an insolvency practitioner on behalf of the debtor. The Insolvency Practitioner will need to confirm that the proposal is viable and that he agrees to act as supervisor of the arrangement if it is agreed. The proposal is generally one which offers to make payments for 60 months, of whatever can be afforded, but is usually at least £200 per month.

The proposal is signed by the debtor and lodged with the court local to the debtor. It is then served upon the creditors, and notice of a meeting is also given. That meeting will take place between two and three weeks later.

At the meeting the creditors vote to accept or reject the proposal. It is often the case that they vote to accept with modifications, which may include increased contribution.

If the debtor accepts the modifications they will become binding on him and the vote will count as an acceptance. If he rejects the modifications, it will count as a rejected vote.

The debtor has to secure acceptances of 75% of those voting by value. I have had cases where debtors with £100,000 of debt have had voluntary arrangements agreed by a single vote in favour for a few hundred pounds. The fact that none of the other creditors voted means that they are bound by the arrangement. They had a chance to vote and chose not to.

It is possible to adjourn a meeting for up to two weeks. This generally happens, if an arrangement is slightly rejected and it is possible to turn a rejected vote into an acceptance by making a slightly better offer, or by chasing in votes which may not yet have been cast, which would ensure that the 75% votes by value were achieved. We have the expertise in our organisation to ensure that a proposal which is put to creditors, has an excellent chance of success.

The fees and costs of making a proposal are paid for out of the contributions made. These fees and costs are agreed with by the creditors.

If you are an individual, a partner in a business or a company director and you think that you might benefit from a voluntary arrangement, call us now.

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