Voluntary Arrangements

Part 1 of the Insolvency Act 1986 contains a procedure which allows for a company and its creditors to implement a number of proposals which may allow the company to avoid other types of insolvency procedures. The proposals, if accepted, must be implemented by a qualified insolvency practitioner. The person nominated can also be the liquidator or administrator.

Examples of voluntary arrangements are:

  • Moratorium (temporary suspension) on repayment of debt
  • Composition of debt, i.e. creditors are offered "65 pence in the pound"
  • Equity for debt swap

The Insolvency Act 2000 introduced a possibility for directors of small companies to apply to the nominee, and then the court, for a 28 days moratorium from creditors' actions in order to put proposals of voluntary arrangements to creditors.

Part 26, Arrangements and Reconstructions of the Companies Act 2006 provides an alternative, but rare form of voluntary arrangement which requires court approval. As defined by s.381 of the Companies Act 2006.