Company Voluntary Arrangements (CVA's) - Process

A Company Voluntary Arrangement, CVA, is a procedure which enables a company to reach an agreement with its creditors about how debt is to be repaid. The CVA may provide for partial or full repayment depending on what the company can reasonably afford to pay.

For example, a Company Voluntary Agreement may provide for a company to pay monthly contributions for a period of 5 years which enables the company to repay 50% of its debt with the remaining 50% being written off.

Creditors do support Company Vonluntary Agreements if the alternative is liquidation with little or no return to creditors. The Proposal must, however, be reasonable and achievable.

Initial Fact Find

We need to find out as much as possible about the company, including details of its assets, its debts and causes for the build up of debt.

Trading and cashflow projections will need to be prepared to establish that, free of debt, the company can fund trading and can trade profitably. Don't worry we will assist.

Drafting the Proposals

Once we have established that a Company Voluntary Agreement is viable and is likely to be considered favourably by creditors, we will prepare proposals which set out how the arrangement will work, what payments creditors will receive and how the assets of the company are to be dealt with. To see how a CVA has worked, see Case Studies.

The CVA procedure can only be administered by Licensed Insolvency Practitioners. In the period prior to the creditors' meeting, the Insolvency Practitioner acts as Nominee. After the proposals are complete, the Nominee needs to prepare a report on the proposals which includes comment on the due diligence they have undertaken to ensure that the CVA proposals are accurate, reasonable and achievable.

The Nominee's Role

For companies with turnover less than £2.8m there is a new Company Voluntary Agreements procedure with a moratorium which is automatic upon filing of certain documents at court. This then gives the company "breathing space" in which to propose and implement a CVA without the threat of proceedings from creditors. The moratorium does, however have to be advertised before and after, which may effect the company's trade. For larger companies, protection from creditors may be obtained by use of the Administration procedure.

If protection is not needed a copy of the proposals and the Nominee's report will be lodged in Court and distributed to the company's creditors.

Creditors' and Shareholders' Meetings

A meeting of the company's creditors will be held to consider whether to approve the proposals.

The company's proposals will be approved if in excess than 75% of its creditors, WHO ARE ENTITLED TO VOTE , agree to support the arrangement. Consequently if just two creditors submit proxies (voting forms) and both of them agree to support the company's proposals, this constitutes 100% approval from those creditors who are ENTITLED TO VOTE.

A meeting of the company's shareholders is held immediately following the creditors meeting to consider the proposals. The shareholders must then decide whether they can agree to the proposals and any modifications that creditors may have suggested.

Relief from Debt

We will set up a standing order for the payment of the company's monthly contribution into a designated bank account. As long as the company continues to adhere to the terms of the arrangement, creditors, whose debts are not secured, cannot pursue the company any further for the recovery of their debt.

The directors will have peace of mind and can now concentrate on the task of ensuring the company can trade profitably instead of constantly fighting fires.

The Next Step

The options for a financially distressed business need to be very carefully considered. For more help with Comapny Voluntary Procedures.Simply forward your details on our Contact Form and we will contact you. Alternatively ring us on our FREEPHONE ADVICE LINE 0800 781 0990.

There is  free debt help and advice available through a variety of debt charities. For more information, we recommend you visit https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator Alternatively if you are a business owner, self-employed or in a partnership, we recommend you visit https://www.businessdebtline.org/.

All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to advise and administer the most appropriate action - all fees will be outlined during your consultation. Retained payment may place you further into arrears. You have the right to a cooling off period of 14 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term.
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