ACCA Applied Skills · Corporate and Business Law (Global) · Insolvency and administration
Zentra Ltd is struggling to pay its debts. Its directors propose to make a formal offer to creditors to pay part of the debts over three years, with the company continuing to trade. The proposal will be supervised by a licensed insolvency practitioner. Which procedure is being proposed?
The procedure is a company voluntary arrangement. It is a binding deal between the company and its creditors to repay debts in part or over time under an insolvency practitioner's supervision, and the company continues trading, unlike winding up or receivership.
- AA company voluntary arrangementCorrect
- BA creditors' voluntary winding up
- CA compulsory winding up by the court
- DThe appointment of an administrative receiver by a floating charge holder
Explanation
A company voluntary arrangement (CVA) is a binding agreement between a company and its creditors to pay debts in part or over time, supervised by an insolvency practitioner, while the company continues to exist and trade. The winding-up options end the company's existence. A receiver is appointed by a secured creditor, not proposed by directors.
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