A Company Voluntary Arrangement (CVA) is an insolvency procedure which allows a financially troubled company to reach a legally binding agreement with its creditors. In a CVA a company can pay part of their debts back or agree payment in full over a pre-agreed period of time.
A CVA can be proposed by the directors of the company, the administrators of the company, or the liquidator of the company.
When the CVA has been proposed, a nominee (insolvency practitioner) reports to court on whether a meeting of creditors and shareholders should be held to consider the proposal.
The meeting decides whether to approve the CVA. If 75% of the creditors (by debt balance) agree to the proposal, it is then legally binding on all creditors who had notice of the meeting and were entitled to vote.
If the meeting of creditors and shareholders approves a CVA, the nominee becomes the supervisor of the CVA.
Once the CVA has been carried out, the company’s liability to its creditors is cleared. This allows the company to continue trading throughout the CVA and afterwards. Once the CVA has been completed any remaining debts will be legally written off and the company continues to trade as before.
CVAs can even be set up when a company is in liquidation or administration.
A CVA proposal is drafted by the directors with the assistance of our Insolvency Practitioners. The proposals are then sent out to all interested parties (court, creditors and shareholders) allowing 14 days notice of the creditors meeting for the CVA.
At the CVA creditors meeting 75% of the creditors (by debt balance) vote either in person or by proxy at the meeting must approve the CVA.
When a company gets into financial trouble an administrator may be appointed to help the company through the difficult times and start trading again if possible.
A Company Voluntary Arrangement (CVA) is an insolvency procedure which allows a financially troubled company to reach a legally binding agreement with its creditors.
Liquidation usually means, the company’s trading stop and its assets are turned into cash or “liquidated”. All other possible liabilities, like employment or renting are stopped.
When a company borrows money from a bank on an overdraft or loan, it will be common for the bank to ask for a security (debenture) against such a loan.