Company Voluntary Arrangement (CVA)

A CVA is an insolvency procedure that allows a financially troubled company to reach a “binding” agreement with its creditors about payment of all, or part of, its debts over an agreed period of time. The directors of a company, the administrator, or the liquidator, but not the shareholders or creditors, can propose CVA’s.

Where very aggressive creditors are involved and before the CVA proposals are made, an application can be made to the court for a “moratorium” which prevents creditors from taking action against the company or its property for up to 28 days.

When the CVA has been proposed, a “nominee” (who must be an insolvency practitioner) reports to the 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 unsecured creditors (by £value) agree to the proposal, it is then binding and all the creditors, who had notice of the meeting and were entitled to vote, are bound by the terms of the arrangement. Once approved, the “nominee” insolvency practitioner becomes the “supervisor” of the CVA for the duration. The company can continue trading during the CVA and once the arrangement has been completed, is free of any liabilities to its creditors.

Read our blog: What are the advantages of a Company Voluntary Arrangement (CVA)?

For partnerships, read about Partnership Voluntary Arrangements, which follow the same process as CVA’s but used where the business is a partnership and partners are jointly and severally liable.

For individuals, read about Individual Voluntary Arrangements

Act now and get professional CVA advice for free from 4Squared.

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