Fledgling serviced office operator Your Space, based in Manchester and Liverpool, is asking unsecured creditors with estimated debts totalling £5.5m to compromise their claims for payment.
Directors of Your Space and its subsidiaries have finalised the terms of a Company Voluntary Arrangement to be put to unsecured creditors of Your Space, Workspace North West and Yourspace UK.
In an announcement made on the London Stock Exchange, Your Space said it is proposed that £1.1m will be paid into a Company Voluntary Arrangement at a rate of £366,667 per annum for the first three years of the CVA, which will commence on 16 February 2010.
It announced last month that it was in talks over setting up a Company Voluntary Arrangement.
Despite the efforts of the directors on 15 September, they formed the opinion that the company did not have sufficient working capital for its present requirements and the directors therefore requested a temporary suspension of trading of the company's shares.
Under the terms of the CVA, unsecured creditors will get 20p in the pound and may receive a further dividend of 40p, depending on Your Space earnings and asset sales. The deal must be approved by at least 75% of creditors.
The CVA proposal document, which contains full details of the CVA, was posted to shareholders and creditors of Your Space and its subsidiaries last night. It said its lender, the Bank of Ireland, supports the plan and HM Revenue & Customs, the largest unsecured creditor, had "agreed to consider it favourably".
Commenting on the CVA proposal, Chris Phillips, non executive chairman of Your Space, said: "This announcement details the continuing steps we are taking to implement the strategy necessary to secure Your Space's long term future. With the support of the Bank of Ireland and the company's other secured creditors, the board is strongly of the view that the CVA proposal is in the best interests of the group and its stakeholders as a whole."
Daniel Butters, who is based in Deloitte's Leeds office, which is handling the CVA, said: "This CVA allows the business to remain as a going concern and to maintain its trade. It offers job security to employees and certainty to its trading partners."
"The use of a CVA will result in a greater return to creditors compared to alternative insolvency procedures such as an administration or liquidation."
The company expects to be able to announce its preliminary results to 31 March 2009 and its interim results to 30 September 2009 by 31 December 2009, depending upon the outcome of the CVA.
A meeting to allow members and creditors to vote on the proposal is scheduled to take place on Monday 16 November at Deloitte's office in Leeds.