What is a Company Voluntary Arrangement (CVA)?

Frequently Asked Questions

What is a Company Voluntary Arrangement (CVA)?

A CVA (Company Voluntary Arrangement) is similar to an IVA, but it’s for companies rather than individuals.

It is a legal process that enables a company to make a binding agreement with its creditors and lenders describing how the company’s debts and credit liabilities will be handled.

A CVA enables a company to reach an agreement with its creditors about how debt is to be repaid and may provide for partial or full repayment depending on what the company can reasonably afford to pay.

Most creditors do support CVA’s if the alternative is liquidation with little or no return to creditors. The Proposal must, however, be reasonable and achievable.

A CVA can only be proposed by a company if it is insolvent or contingently insolvent.

The CVA will require the approval of 75% or more of the voting creditors. If it is approved, the CVA binds all creditors irrespective of how they voted and allows the directors to retain control of their company.

A CVA aims to serve the best interests of the creditors while allowing the company to continue trading and to keep the work force in employment.

The are several components that are vital to a successful CVA proposal including a business plan to return the company to profitability, in other words directors must accept there is a need for change.

The Key Benefits of a CVA:-

The Company continues to trade under the control of the Company Directors.
Historic debts are frozen, no interest or costs will accrue.
Deferral of Payments will ease the pressure of cash flows.
Repayment structure of the CVA is flexible, pay what you can afford.
The creditors have no enforcement action available.
No liquidation or administration needed.
No pre-pack, so no need to buy all assets.
Existing funding can generally be left in place.
Protection from the Court can be obtained while the CVA proposal is considered by the creditors.
No report on the conduct of the Director required.

Further Information

Is there an accumulation of old debt that is ruining a good business?

Many companies have achieved their own recovery plan and are returning to profit on current operations, but are burdened with debt that was incurred before changes were made.

Some are looking for a pressure release of debt to enable them to take steps to revitalize their business. A CVA could be the best option to take your business forwards.

Consolidate the old debt

A Company Voluntary Arrangement will consolidate the old debt and put to one side allowing the company to trade forward without the pressure of the old debt.

Qualifying Criteria

There is no specific criteria to qualify for a Company Voluntary Arrangement other than you need to be a Company or a Limited Liability Partnership.

It Can Help Obtain More Time

A Company Voluntary Arrangement is an opportunity for a company to obtain more time to pay back those they owed money to, often this will involve a eduction in the amount of money paid back. Business leaders will be able to continue to run the company without interference from third parties.

If a company has a sustainable future, but is hampered by the historical debt which leads to cash flow problems, then a CVA can be a good solution.