What is a Company Voluntary Arrangement [CVA]?
A CVA is a formal corporate turnaround procedure that allows a company to ring-fence historic debt and reach agreement with its creditors as to how that debt is to be repaid, in full or in part. It provides legal protection to the company and leaves the directors in control of all company operations and decision making. The process is overseen by a Licensed Insolvency Practitioner, who acts a Nominee under the proposal and then as Supervisor of the arrangement.
It is a highly flexible business rescue tool governed by the Insolvency Act 1986 where a company enter into a legally binding agreement with its creditors. It gives the company breathing space in which to try and trade out of its difficulties or give it time to sell its assets to provide a better outcome for creditors than liquidation. Payments to existing creditors are frozen and the directors are left in control of the company’s affairs whilst a Licensed Insolvency Practitioner will act as Supervisor ensuring that the agreement that has been reached is adhered to by all sides. Quite often creditors will be required to write off significant amounts of debt as part of the CVA agreement.
We will assist in the preparation of the CVA Proposals [i.e. the Business Plan] that has to be put to the creditors in order to get their agreement to the proposed turnaround strategy. We are also able to help prepare the required financial forecasts to be included in the Proposals and, where necessary, can speak and sometimes meet with the company’s bankers and other key creditors, including HMRC.
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