21st Oct 2020 | Articles

In this article Richard Bottomley gives an overview of what Company Voluntary Arrangements (“CVAs”) are. He also explains when they are used and the advantages and disadvantages to the company and creditors.

What is a CVA?

A CVA is a procedure that may help a company to address its financial difficulties by coming to a compromise, or other arrangement, between a company and its creditors under Part I of the Insolvency Act 1986. It can permit a company to settle its debts by paying only a proportion of the amount that it owes to creditors, and/or to come to some other arrangement with its creditors over the payment of its debts.

Who is eligible for a CVA?

A company is eligible for the CVA procedure if it is a company registered under the Companies Act 2006; a LLP; a company incorporated in a member state of the EEA; or a company not incorporated in an EEA member state but having its centre of main interests in a EEA member state (other than Denmark).

How to implement a CVA

If the relevant company is not in administration or liquidation, its directors may propose a CVA to the company’s shareholders and creditors. If the relevant company is in administration or liquidation, the administrator or the liquidator, as the case may be,may propose a CVA. A proposal for a CVA should nominate a person to supervise the implementation of the CVA, who must be a qualified insolvency practitioner (“the nominee”). Those proposing the CVA prepare a document setting out the proposals. They generally do so with the assistance of the nominee. The proposals document is then delivered to the nominee.Where the nominee is not a liquidator or an administrator of the company the nominee is required, ordinarilywithin28 days of being given notice of the proposal,to submit a report to the court as to whether, in the nominee’s opinion, the proposal should be considered by the company’s creditors and members. If so, the nominee has to seek a decision of the company’s creditors by way of a decision procedureand a decision of the company’s members at a meeting of those members


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