Company Voluntary Arrangement (CVA)

A company voluntary arrangement is a formal process that enables a compromise between an insolvent company and its creditors so a proportion of company debts can be repaid over a fixed period.

A CVA is an insolvency solution for viable companies in serious debt that wish to trade out of difficulties and retain control of their company. An insolvency practitioner will negotiate a payment plan with creditors based on your affordability.

A company voluntary arrangement is subject to a vote passed by creditors representing 75% or more in value. To maximise the likelihood of creditor approval, the CVA proposal must be affordable, and projections realistic.

Insolvency practitioner appointed – A licensed insolvency practitioner will be appointed to assess the company situation and decide whether a CVA is the most appropriate solution for the business and its creditors. The insolvency practitioner will review company liabilities, assets and cashflow to determine whether a CVA is realistic.

CVA proposal drafted – The insolvency practitioner will draft a CVA proposal that will provide a structure for a proportion of the debts to be repaid over a fixed period, typically through monthly contributions. The final proposal will be filed at court, allocated a legal originating number, printed, and distributed to creditors.

Creditor and shareholder meeting held – A separate creditor and shareholder meeting will be held once the CVA proposal has been distributed.

The CVA is put into motion if 75% or more of the unsecured creditors by debt value approve, and 50% or more of unconnected unsecured creditors participating in a separate vote, vote in favour. A vote is also taken at the shareholders’ meeting, with a majority of 50% or more required for the CVA to be approved.

CVA takes effect – The CVA will take effect from the date of the Creditors’ Decision, after which no action can be taken against the Company by its creditors.

Better return for creditors – Creditors are typically willing to support a CVA, as alternative solutions, such as company liquidation, would see them receive significantly less.

Creditors maintain control – Company directors can maintain control of the company as they attempt to trade out of difficulties.

Protection from legal action – No action can then be taken against the Company by its creditors while a CVA is active.

Creditors are legally bound – Creditors are legally bound to the terms of the arrangement and existing contractual payment terms must be changed to reflect the terms of the CVA.

As licensed insolvency practitioners, we can help to ensure that your Company Voluntary Arrangement is viable. We have worked with thousands of distressed companies and we understand that being pursued for unpaid debts is a hugely stressful time and equally recognise that creditors simply want to be paid.

If your business is potentially viable but struggling with cash-flow problems or facing threats from creditors such as demands or even a winding-up petition, a Company Voluntary Arrangement could help end creditor pressure and revive your company. To discuss if a Company Voluntary Arrangement is the right step for your business, get in touch with a member of our team.