Company Voluntary Arrangement (CVA)
A CVA is a very flexible tool that is probably not used as often as it should be.
It is a formal arrangement between an insolvent business and its creditors, to allow the business to trade out of its current difficulties. A proportion of debt may also be written off.
A CVA allows a company to restructure and re-evaluate the business and to create better structures and business strategy.
What is CVA?
A CVA is quite different to other forms of insolvency – the control over the daily trading activities and daily management decisions remains with the directors. This makes it a cheaper process than administration.
The Insolvency Practitioner is only there to ensure that the company complies with whatever obligations are approved by the company’s creditors as part of the CVA.
How does Company Voluntary Arrangement work?
Essentially a CVA is an agreement between the company and its creditors, to freeze the existing debt, to allow the company to trade out of its difficulties and to make contributions over a period of time, normally three to five years, into a pot for all creditors.
At the end of the agreed period, the Insolvency Practitioner (known as the Supervisor) will then distribute the agreed dividend to the creditors. If successful, the Supervisor will issue a certificate of satisfaction and the company is then free of its obligations under the CVA.
For a CVA to be successful, certain criteria must be met. The company must have a good underlying business and must be capable of making profits once the pre CVA debt has been frozen. To implement a CVA successfully the support of its key clients and suppliers going forward post CVA is essential
Should any creditor present a winding up petition, the insolvency practitioner will try to persuade the creditor to support the CVA
To implement a CVA, a proposal is put to the creditors offering to pay a percentage of the outstanding debt over a period of time.
Careful consideration is required in working out what you would like to offer to the creditors, the level of dividend you choose and whatever period you choose will have to be approved by the creditors. We will look carefully at your company’s current financial position and offer advice based on our experience of such schemes, as to what we think would have a realistic chance of being approved.
Once we’ve determined how much and over what period, we will then do everything that is required to get the scheme approved.
This will involve sending a copy of the proposals to every creditor that you wish to include in the scheme and preparing for either a virtual meeting of creditors or dealing with the resolutions by post. Immediately following the creditors’ meeting a shareholders meeting will be held to pass the relevant resolutions approving the CVA.
At the creditors’ meeting, the proposal is discussed and voted upon. If 75% in value of creditors entitled to vote, voting in favour, then all creditors that received a copy of the proposal are bound by it. Creditors can also seek to make modifications – we can discuss this in detail with you, if you think that a CVA is the right option your company.
How Can McLenan Corporate Help Me?
We are Licensed Insolvency Practitioners, and this is what we specialise in. We are able to provide you with complete independent advice. We will always ensure that upon speaking with the Directors of a Company that we explore all the options that are available.
It is our priority to keep your business away from a formal insolvency procedure. If this cannot be avoided, we will determine whether Company Administration is a suitable process.
We will work closely with you to understand your business in its entirety before providing you with any recommendations. In times of financial pressure, we understand the uncertainty and issues that are being faced, so here at McLenan Corporate, we provide all our initial advice and guidance free of charge.
Only in the event of formal instruction will we begin to charge fees and these will be agreed with the client, in writing, before any work is commenced and given that our professional charges are very competitive, we are in a position to provide the necessary help that you need.
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Marathon House, Olympic Business Park
Drybridge Rd, Dundonald
Kilmarnock, Ayrshire KA2 9AE
McLenan Corporate is a trading name of McLenan Corporate Solutions Limited, Marathon House, Olympic Business Park, Drybridge Rd, Dundonald, Kilmarnock, Ayrshire KA2 9AE. Company Number SC651445.
Margo McLenan is licensed to act as Insolvency Practitioner in the UK by the Insolvency Practitioner Association.
Insolvency Practitioners are bound by the Code of Ethics when carrying out all professional work relating to an insolvency appointment.