Company Voluntary Arrangement
A CVA may be a realistic solution where the business is viable but needs a breathing space to recover from a one-off problem, such as a large bad debt. A CVA is unique amongst formal corporate reconstruction processes in that if it is approved it leaves the Directors in charge of the company’s affairs.
A CVA is a proposal, made by the Directors to the company’s creditors, to compromise their rights against the company in return for the prospect of a better recovery against their debt and, frequently, the prospect of making future profits by continuing to provide goods and services to it.
The compromise will typically consist of a deferral of payment and/or a reduction in the amount payable, funded by company contributions paid into a scheme fund from future cash flow. A contributions-based CVA will typically continue for 5 years.
An insolvency practitioner will act as Nominee to the Directors’ proposal and check that it is viable and feasible. He will convene meetings of the company’s creditors and members to consider and approve it (creditors may propose modifications) and if approved he will act as Supervisor of the arrangement and oversee the delivery of it.
An approved CVA is legally binding on both the company and all of its creditors. Failure by the Directors to deliver the approved compromise is however likely to lead to the liquidation of the company.
Live Recoveries can advise you if a CVA is appropriate to your company’s circumstances.
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