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  • Company Voluntary Arrangements (CVA)

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    A CVA is a legally binding contractual arrangement between a Company and its Creditors.  In its basic format, a CVA provides the Company with a formal platform through which to make an offer to their creditors to accept payment of their debt at a reduced rate and/or over a larger period of time. Once this offer has been accepted, all unsecured creditors are bound by its terms.

    This process is primarily used to ease cashflow and protect certain assets, typically key to the survival of the Company (Plant and Machinery etc), although there are great many other scenarios where the process will prove effective in rescuing a struggling company.

    In order to propose a CVA, it is necessary to draft a proposal to creditors and convene a Meetings of Creditors and Members to consider these proposals.  For the Proposal to be accepted and implemented it is requirement that in excess of 75% of those creditors voting at the Meeting, consent to the Proposal (with or without modifications).

    Key Facts:

    • A CVA is only likely to be adopted if the terms provide for a better distribution to creditors, than would be the case in the event of the company’s Liquidation.
    • Once an Arrangement has been accepted, even those that voted against it are bound by its terms.
    • Director(s) retain control of Company.
    • It is possible to save the Company.
    • It may be possible to apply for a moratorium to protect the Company from creditor action whilst the Proposal for a CVA is being prepared and considered.
    • The Proposal is designed to provide the best offer by the Company to its Creditors.
    • Failure to comply with the agreed terms could result in failure of the CVA, which in most cases (and dependent on the terms of the Arrangement) will lead to the winding up of the Company.
    • CVA’s are processed through the Courts, although most appointments will be made without its direct involvement.
    • There is no requirement to investigate the conduct of the Director(s).

    How we can help:

    • We will arrange a free initial consultation with the Director(s) to evaluate the Company’s financial position, provide details of all available options, and make appropriate and bespoke recommendations.
    • Explain the process adopted in detail and answer any questions or concerns.
    • Liaise with Creditors on the Director’s behalf.
    • Convene the requisite Meetings on the Director’s behalf.
    • Assist in the Preparation of the Proposal and accompanying documentation.