Company Voluntary Arrangement - CVA

When a company in the UK is experiencing financial difficulty and cannot pay off their debt they may apply for a Company Voluntary Arrangement. Before this can be done the company must first be examined to determine if there is anything left to salvage.

The board of directors can ask for a CVA in an effort to save their company, pay off their debt and make a profitable future. With the assistance of an Insolvency Practitioner the company can propose a Company Voluntary Arrangement to their Creditors and the financial reconstruction can begin.

Process for a Company Voluntary Arrangement in the UK

An Insolvency Practitioner is employed by the company in debt to determine the best course of action. The IP will review all financial records and determine if a CVA will not only be beneficial in the present but also assist the company in being profitable in the future.

After the company has decided to proceed with a Company Voluntary Arrangement a proposal will be created dictating the payments. It is important when drafting your proposal that you look for what is best for the Creditors, after all they want as much of their money back as possible. If they stand to gain more money by liquidation they will not approve your CVA proposal.

After the proposal is created the Insolvency Practitioner will legalize your documents, which is then sent to your Creditors. The average time allotted to Creditors to review your proposal is about three weeks. At the end of this time a meeting will be held with you, your Creditors and your Insolvency Practitioner, who will head the meeting.

During this meeting your Creditors will be able to voice their thoughts and offer up changes to your proposed CVA. At the end Creditors will take a vote. It requires that 75% of your Creditors vote in acceptance for your CVA to be approved.

Those Creditors in the room who did not agree during the first vote then conduct a second vote. During this vote you must obtain more than 50% of the votes in your favor.
At the close of the meeting your Insolvency Practitioner will submit a report of the meeting and the decision to the Court.

With the approval of a Company Voluntary Arrangement the company can begin to pay off their debt. A CVA is a legally binding agreement that exists between all the Creditors and the company to make accurate and timely payment of their debt over a specified course of time.
If at any time during the CVA the company is not making a payment or if they run into additional financial distress they should contact their Insolvency Practitioner immediately, it is possible to renegotiate your CVA if absolutely necessary.

If at any time the company defaults on their agreement the CVA will be dismissed and the company will be up for liquidation.

CVA in a nutshell

Company Voluntary Arrangement is similar to an Individual Voluntary Arrangement. The difference between the two is that an IVA focuses on an individual whereas a CVA is directed at corporations and businesses. As with an IVA the business under a CVA can clear a large sum of their debt over a certain time span.

Unlike an IVA there are more people involved with a CVA and also more people who can initiate the process. The company board of directors can initiate a CVA or someone how has the legal authority or if the company is up for liquidations the liquidator can request a CVA be applied for.

The Insolvency Practitioner will play an important part in the CVA process as well. He will help the company in creating a proposal where it will be discussed in a meeting with the Creditors and voted upon.

As with an IVA the proposal for a CVA must pass with a vote of 75% in order for it to go into effect. After approval of your CVA the company will make monthly payments to their Insolvency Practitioner who will be responsible for doling out the money.

During the time of your CVA the company will be protected from any actions from any Creditors.

A CVA is a serious matter. You have to understand all the legal consequences, costs and conditions before applying. It is necessary for you to evaluate your Business circumstances with a registered Insolvency Practitioner.

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