What is a Company Voluntary Arrangement (CVA)?

When a profitable company is struggling to repay its debts due to cash flow problems, a CVA allows it to propose repayments in line with what it can afford, or offer an alternative method to compromise the debts.

A CVA is a contract with creditors which ordinarily suspends interest and sets out how much, and over how long, the company will repay the agreed level of the company’s debt to its creditors. In certain circumstances, this may involve the need for additional funding or another form of restructuring, which we can assist with.

It allows the business to continue trading whilst providing creditors and other stakeholders with a better financial outcome compared to the company entering into liquidation.

Key Points

  • Directors can instigate a CVA proposal if it offers a viable and better alternative to  Liquidation
  • An Insolvency Practitioner acts as an independent Nominee and (if the CVA is accepted) Supervisor of the CVA
  • Creditors may approve, modify or reject the proposal. Support of 75% in value of the creditors is required to approve it
  • If approved, the CVA proposal takes effect, the company continues to trade and is protected from creditor enforcement action
  • A Supervisor oversees compliance with the CVA terms, but plays no active role in the business – directors remain in control
  • If the company defaults on the terms of the arrangement, a petition may be issued for the company to be placed into liquidation

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