Corporate Voluntary Arrangements (CVA's)

A Company Voluntary Arrangement ("CVA") is an agreement between creditor (those owed money) and debtor (the firm / company).

The agreement allows the company to continue trading provided that a proportion of the debt is repaid over a set period.

The directors of the company must propose and sanction the CVA. The proposal must then be formally prepared by, preferably, a licensed insolvency practitioner who will set out how the company intends to repay the debt.

The benefit to the company of entering into such an arrangement is that they can continue to trade and gain an opportunity to avoid liquidation.

The benefit to a creditor is that they will recoup more of the debt owed to them than would otherwise be the case were the company to cease trading. If the company went into for example, compulsory liquidation, the creditors may end up recovering a lesser proportion of the debt.

The proposal will need to be lodged at Court and then circulated to all creditors together with notice of a Meeting of Creditors.

Creditors can attend the meeting to discuss the proposals for a CVA or they can vote by proxy.  Some may not bother to vote. However, so long as 75% of those who do vote, support the proposals then the proposal will more than likely be accepted and will be binding on all creditors who have been given notice of the CVA.

So as with an Individual Voluntary Arrangement (IVA) this means that all creditors are formally bound into the arrangement without necessarily achieving 100% specific agreement.

SPEAK TO REGULATED Insolvency solicitors IF AT ALL POSSIBLE. The credit management industry is notoriously unregulated and this can make it difficult to obtain good advice.

MAKE SURE ANY ARRANGEMENT YOU ENTER INTO IS RIGHT FOR YOUR COMPANY AND NOT JUST RIGHT FOR THE CREDIT FIRM OFFERING YOU THE PLAN