Company Voluntary Arrangement
What is it?
A
Company Voluntary Arrangement ("CVA") is an agreement between the insolvent company and its creditors.
Who is it for?
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The Process
- It is a rescue procedure
- A CVA is usually made in full and final satisfaction of creditors' claims against the company
- The proposal is usually made by the directors, but can be made by an administrator or liquidator
- The proposal is considered by an insolvency practitioner appointed as nominee. His report on the proposal and the proposal, itself, are then put before a creditors' meeting at which approval will be sought
- The arrangement may be approved without alteration, rejected or approved subject to modifications proposed and agreed at the creditors' meeting
- If the creditors' meeting approves the arrangement, all creditors who had notice and who could vote at that meeting are bound by the arrangement, as are any creditors who would have been entitled to vote at the meeting had they had notice of it
- The approval of the arrangement can be challenged in court within 28 days of the creditors' meeting for material irregularity
- Unless the approval of the arrangement is successfully challenged, the proposals are carried out under the guidance of the Supervisor appointed at the creditors' meeting
- In certain circumstances a moratorium may be available to eligible companies, giving them protection from their creditors until the date of the creditors' meeting
Advantages
- There is no requirement to advertise the proposal, or approval of the proposal in any newspaper. This results in less publicity and reduced costs
- On the successful completion of the CVA the company's legal entity will remain substantially unaltered and the directors will be free to continue the business as they see fit, or sell the business to new management
- The voluntary arrangement can be for a set period and provide a "hiatus" period whereby the company can restructure or refinance without creditor pressure
Disadvantages
- The CVA does not affect the rights of any secured creditor (without their consent). Creditors which hold personal guarantees, e.g from the directors, may still take action to enforce these guarantees even if they have consented to a CVA
- Notice of the approval of the voluntary arrangement is filed at Companies House and therefore basic details of the voluntary arrangement are available to the general public
- The CVA does not necessarily provide for the dissolution of the company and, even if the proposal provides that the company ceases to exist after the successful completion of the arrangement, at any period within 20 years following dissolution the company may be resurrected and placed into liquidation by a creditor in the event that a contingent or unknown liability were to be pursued
| To view the standard Terms & Conditions for a CVA please click the following link |
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Other Options available
Call
us on 0800 195 4585 if you require advice regarding 'Company Voluntary Arrangements'.
