A Corporate Voluntary Arrangement (CVA) is a
legally binding arrangement between a company and its creditors to
repay, either in full or partly over a period of time.
|
Key Benefits
• Enables the company to continue in business with a view to
improving the position of the creditors;
• Stops court action and winding up procedures;
• Eases cash flow pressures;
• Directors are allowed to remain;
• Greater flexibility allowed to ensure that the return to creditors
is maximized; |
If a company has a viable future, but current cash flow problems
have resulted in mounting pressure, a CVA may be a good solution not
only for the company but also for creditors.
Frequently asked questions concerning CVAs
What is the financial structure of a CVA? - It could be a
combination of capital injection and asset realization or monthly
contributions. Once a pool of funds is available it gets distributed
to creditors.
Are the company's current liabilities frozen? - Yes, once the
CVA is in place no enforcement action can be taken by pre-CVA
creditors.
How long do we have to repay creditors? - Every CVA is
different and a sensible time frame should be set.
What if the company can't pay creditors back in full?
Something is better than nothing. Remember, any proposals made to
creditors must represent the company's best efforts to compensate
its creditors and ultimately need to be supported by a business
forecast.
How is a CVA approved?- With the support of the company's
members and creditors, it should be remembered a CVA is made to the
company not by the company.
Who controls the company?- The existing Directors and
management.
How long will it take to get approved? It depends on the
urgency of a case, but we would estimate 28 days to be the average
time.
What happens if the company cannot make the contributions? A
provision in the terms of the CVA would provide depending on
circumstances some leeway or modifications could be proposed, if
these fail then the company will have to enter into Liquidation
What happens to secured creditors? Secured creditors
usually will not vote in a CVA. Be that as it may, it is absolutely
vital that any CVA proposals are discussed with them in advance.
They will need to be comfortable with the CVA otherwise they retain
the right to appoint a receiver and manager. Remember, secured
lenders prefer a solution not a problem.
No CVA can be structured in any way if it prejudices secure creditors rights.
What happens to preferential creditors? Preferential creditors will need to be paid in full before any contributions can be made to the unsecured creditors. No proposal for a CVA can incorporate conditions compromising preferential creditors' statutory rights.
Do they work? Not always.
It will depend on the construction and the amount of pre-planning
and in some cases a little bit of luck.
Simply contact us for free, no obligation advice.
Our team of professional and friendly advisors will assist you
through the CVA process step by step. |