Company Voluntary Arrangements

The decision to propose a CVA to creditors is one taken by the directors of the company. Through a formal proposal, generally drawn up on their behalf by a licensed insolvency practitioner they propose a scheme to creditors to maximise the return to them whilst allowing the company to continue.

The proposal, which is supported by the insolvency practitioner, is 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. Inevitably, a number will not vote at all.

However, so long as 75% of those who bother to vote, in value, support the proposals then they are accepted and they are binding on all creditors who have been given notice of them. This means that all creditors are formally bound into the arrangement without necessarily achieving 100% specific agreement. Even creditors who vote against must abide by the terms of the CVA if sufficient other creditors vote in favour.

A typical CVA will last for between three and five years and will provide for the company to make voluntary contributions from income on a monthly basis. These monies will be paid to the appointed insolvency practitioner who will agree the claims of creditors and who will pay out dividends as and when it is economic for him to do so.

Creditors do not need to receive 100p in £ for a CVA to be accepted. At the end of the CVA period, if it is successfully completed then creditors are obliged to write off any part of the debt which has not been repaid.

The order of priority for payment of dividends to creditors is governed by statute. Please see the note on Creditors' Voluntary Liquidations for more details.

CVA's are attractive because they are not advertised, they are agreements between the company and its creditors only and they allow the directors to remain in control of the business. The role of the insolvency practitioner is an advisory one and he ensures that the CVA is adhered to by the company.

This note represents a brief overview of the CVA procedure. For more detailed information in specific circumstances contact Ian Williamson at Campbell Crossley & Davis on 01253 349331.

This note is meant as a brief overview of CVA's. It is not a detailed review and further detailed advice should be taken before coming to any decision. No responsibility can be accepted by Campbell Crossley and Davis, its partners or employees for any loss occasioned by any person or persons acting or refraining from action as a result of material contained in this note