Company voluntary arrangements (CVAs)

A CVA is a legally binding compromise agreement between a company and its creditors, in relation to its debts, which is based on a proposal that a minimum of 75% of the company’s creditors must agree to by way of a vote.

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Alternatively, the company can sell assets to repay creditors from the proceeds. Whatever agreement is chosen, all parties are contractually bound to adhere to the agreed terms.

CVAs are often used by companies that are struggling financially, due to a debt burden, but ultimately remain viable businesses; they just need protection and time to trade out of their current difficulties.

Creditors are usually supportive of a CVA, as it normally means that they recover more money than they would do if the company was to be placed into liquidation.

The appointed insolvency practitioner must satisfy themselves that the company is viable and is suitable to enter into this arrangement.

Forecasts are prepared to support this view and to ensure the company can meet the terms of the CVA.

Benefits of a CVA:

The timescales for implementation of the CVA arrangement normally amount to six to eight weeks on average from the initial contact with the insolvency practitioner.

A CVA has the least stigma of any insolvency process, and, ultimately, if the arrangement is successful, the company’s undertaking remains.

Watch our video below where Partner and licensed Insolvency Practitioner Michael Roome explains more about CVAs. This video is part of our wider Dealing with Company Debt video series, which can be viewed on our YouTube channel.

Dean Nelson, Nicholas Lee, Andrew Stevens and Michael Roome are all licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales. They are bound by the insolvency code of ethics, which can be found here.
When acting as receivers, administrative receivers or administrators, they act as agents only, without personal liability, and when acting as administrators, the affairs, business and property of the company are being managed by them.
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