Absolute Recovery Limited
 
 
COMPANY VOLUNTARY ARRANGEMENT "CVA"
 

 

What is a CVA?     Eligibility for a CVA
         

A CVA is a formal process enabling a compromise to be entered into between a Company and its Creditors, based on a vote passed by a majority of Creditors more than 75% of those voting on the proposal.

 

Although a Company must be regarded as insolvent/contingently insolvent, the appointed Insolvency Practitioner should be satisfied that the business is a ‘going concern’ operating under fundamentally sound practices.

         
All Creditors are then legally bound to accept the terms of the CVA – including those who were non-voting or did not receive notice of the decision which provides structure for a proportion of the debts to be repaid over a fixed period of time – typically monthly contributions to the CVA Supervisor.   Projected cash flow forecasts will be required as evidence of the Company’s ability to meet the CVA terms, with clear and accurate financial reporting systems being beneficial to the smooth-running of the process.
         
It is a fairly common insolvency solution as an act of recovery; particularly for companies that are struggling under the burden of debts but are still viable businesses. For directors wishing to retain control of the Company and attempt to trade out of difficulties, a CVA is likely to be the most suitable solution.      
 
 
 What are the benefits of a CVA?
 
 

It is a flexible, legally-binding tool that offers protection from creditors

The company is able to carry on trading, and can restructure to improve overall profitability

Pre CVA debt repayments are consolidated into one single payment

Cash flow can quickly improve, providing increased working capital

Company Voluntary Arrangements can be cheaper than other insolvency options as they do not involve the court, apart from when challenged

Steps can be taken to reduce outgoings - for example, ending leases and employment contracts

The company situation is not advertised publicly as in the case of company administration

If action is taken quickly enough, a CVA can prevent a winding-up petition from taking effect

 

 
 
 General outline of the CVA process
 
 

A Licensed Insolvency Practitioner (“IP”) is approached - they will assess the Company situation and decide whether a CVA is the most appropriate solution, keeping both business and Creditors in mind.

If recommended by the IP, a CVA proposal is drafted following a detailed review of the Company, its liabilities and assets.

The Company directors may agree its terms or request amendments, but the IP must be satisfied that any final proposal has a reasonable chance of success before proceeding.

Upon agreement the final proposal is filed at court, given a legal originating number, printed, and then copies distributed to Creditors.

The IP arranges separate decisions for Creditors and Shareholders not less than three weeks following the distribution of the CVA.

The proposal is approved if 75% or more of the Creditors (by debt value), vote in favour of the CVA, including postal and proxy votes.

A vote is also taken at the Shareholders’ decision, with a majority of 50% or more (by debt value) required for the CVA to be approved

The IP chairs each decision, and on successful approval issues a report to the court and all Creditors within four days. The report details the outcome of each decision - the results of each vote.

The CVA takes effect as from the date of the decision- no action can then be taken against the Company by its Creditors unless there is a default or the debt was incurred post CVA approval, in which case it will probably result in the failure of the CVA and potentially the Compulsory Liquidation of the Company.

So, if your business is potentially viable but struggling with cash-flow problems or facing threats from Creditors such as demands or even a Winding-Up Petition, a Company Voluntary Arrangement could help bring an end to Creditor pressure and revive your Company.

If you think a CVA might be right for your Company, get in touch today for a confidential consultation with no obligation.

 
 

 

 

 
Absolute Recovery Limited
1st floor, Block A
Loversall Court
Clayfields
Tickhill Road
Doncaster
DN4 8QG
 
 
Tel: 01302 572701
 
 
Absolute Recovery Limited, Registered No. 7966220

 

 

 

 

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