What Is A Company Voluntary Arrangement (CVA)?
Company voluntary arrangements involve putting forward a “proposal” to the company’s creditors. This proposal will outline how the business will deal with the difficulties it is in, and will include a proposal to give a certain return to creditors over a number of years (i.e. Xp in the £).
It is usual for proposals to last for a number of years (3-5) and for the company to commit to paying a certain monthly contribution into the scheme. This contribution s into the arrangement may be linked to increased profit levels, sale of particular assets, sale of a division of the company, or a corporate reorganisation. They can be as simple or complex as the business requires. If accepted by the relevant number of creditors, then all creditors are bound by the terms of the proposal and cannot enforce their debts separately. In return for this, the company commits to abide by the terms of the CVA.
The scheme is supervised by a licensed insolvency practitioner who ensures that the company complies with the commitments outlined in the proposal, and by making distributions to creditors out of the sums available. The supervisor will report annually to creditors on the progress of the CVA. |
