Recovery and Insolvency Services

Corporate Voluntary Arrangements (CVAs)

A voluntary arrangement (“CVA”) is when a company makes an agreement (usually formally) with its creditors by proposing an arrangement (formally approved by the court), in which the company has agreed terms with its creditors for the settlement of its debts.

A voluntary arrangement may be proposed by the administrator, a liquidator, or the directors.

The nominee appointed to supervise its implementation reports to the court within 28 days on whether, in his or her opinion, meetings of the company and of its creditors should be called.

Meetings are summoned by the nominee to decide whether to approve the voluntary arrangement which, subject to certain restrictions, may be approved with or without modifications. It is then binding on all creditors who had notice of the meeting and were entitled to vote.

But is the bank going to support a CVA, or how is the ongoing trading to be financed? Legislative changes may follow, but are unlikely to help!

What you need to know most about CVAs is that because of funding and other problems, CVAs are only suitable for very big businesses. They are rarely proposed, and almost never work. However, there is some protection afforded by an Administration which can help to ensure the CVA has some prospects of success.