Company Voluntary Arrangement (CVA)
What is a Company Voluntary Arrangement (CVA)? - a Company
'Voluntary' Arrangement (or CVA as its known), may be appropriate, as a means of
rescuing the business as a going concern. A CVA is very similar to an
IVA
for an individual. It is a legal agreement between a business and its creditors.
The purpose of a company voluntary arrangement is to assist companies to enter
into agreements with their creditors. The process can be initiated either before
or after the processes of either administration or a Winding Up
order.
How Does is it Initiated? - creditors themselves not allowed to put forward the CVA, this
must be done by a qualified insolvency practitioner. They are known as 'the
nominee' of the scheme. A CVA can also be put forward by the
Administrator (if an Administration Order exists), or a Liquidator (if the
company is in the process of being wound up) or even
by the company directors of the Company.
The Creditors Meeting - a proposal is put forward for
'composition in satisfaction of its debt' or a 'scheme of arrangement of its
affairs' to its creditors in order to rearrange the company's financial affairs.
If the company can be saved from administration, the Insolvency Practitioner
brings together all the financial information and attempts to convince creditors
(via a comprehensive profitability and cash flow plan ) that the business is
still fundamentally sound and can continue trading as a going concern. Where the
nominee is not what the liquidator or the administrator, the nominee must submit
to a court as to whether or not the proposal should be submitted to the company
and its creditors. Where the nominee is the administrator or liquidator this
simply call a meeting of of the creditors' and business owners of the company.
This is known as the creditors' meeting. Any modifications to the proposal are
binding upon acceptance at the Creditors Meeting. A CVA cannot be put forward to
a creditors' meeting and approved, where the proposals contained within it
affect the rights of secured or preferential creditors, and those creditors have
not given their consent. Once the arrangement has passed a majority vote and
been approved, a court can postpone any winding up proceedings or discharge any
administration process that may be in existence.
On-Going Process - the nominee must immediately send a
copy of the Chairman's report to Companies House and at twelve month intervals,
together with other statutory document. [1]
External Links and References
1 CVA
Guidance Notes from Companies House
