What Is A Company Voluntary Arrangement?
If you’re looking for a debt solution to stop your business from going into administration or liquidation, there’s an option that could help you save it: the company voluntary arrangement (CVA).
A CVA is a formal procedure that gives businesses like yours a chance of recovery. It sets out how repayments should be made to creditors and is one of the most favoured rescue routes for companies.
What Is A CVA?
A Company Voluntary Arrangement (CVA) is one of the most useful rescue tools available to a company with viable future prospects but burdened by historic debts. It enables the directors to trade out of their current financial difficulties while addressing the problems that led to the debts in the first place.
The process starts with contact and advice from an insolvency practitioner to explore the options open to the company. This is free of charge and a consultation will help to determine whether the CVA is the best option for the company, with a view to preparing a proposal that could be formally presented to creditors.
CVA Proposal
The CVA proposal consists of a plan that details terms that allow your business to keep trading and repay its creditors over a longer term. This should offer creditors a better return than alternative insolvency procedures such as administration or liquidation.
The process to put a CVA in place involves contacting a licensed insolvency practitioner (IP) who will work with you and your company directors. They will then collect information about your company and produce a draft CVA proposal that is sent to creditors for consideration.
Creditors’ Vote
The Creditors’ Vote is an important part of the voluntary arrangement process. It allows creditors to have a say on the terms of the proposed CVA and the negotiations that may follow.
A majority of creditors must vote for a proposal before it can be accepted. If a CVA is approved by 75% of creditors then it becomes a legally binding agreement and will govern the company.
This is why it is crucial that every creditor has the opportunity to participate in a meeting. To ensure this, it is important that creditors return any evidence to the nominee, who will decide if they are entitled to vote.
CVA Supervisor
CVAs are a rescue tool for companies facing financial difficulties and whose Administration or Liquidation would be too damaging to the company’s business. They are supervised by a Licensed Insolvency Practitioner who is independent of the company and its management.
Creditors must be able to be convinced that the repayment proposals are realistic and a fair deal for them. They also need to be reassured that the implementation of the CVA will be overseen by an independent professional who is acceptable to them and who will not be tempted to compromise the CVA’s terms.
