Company voluntary arrangements - (CVA's).

What is a Company Voluntary Arrangement?

A Company Voluntary Arrangement (CVA) is an alternative to Liquidation, by which a Company settles with its creditors on such conditions and terms as may be agreed.

With the assistance of a Licensed Insolvency Practitioner, the Company will put forward a set of proposals to its creditors at a Creditors' Meeting , and if they approve the proposals, then they cannot wind up the Company or take any other legal action against it as long as it honours its side of the agreement.

A CVA enables both the Company and its creditors to benefit. It enables the Company to continue in business without severe restriction or damage to its reputation.

A CVA can be an exit route from an Administration, which is also a rescue and restructuring procedure.

The main features of a CVA which need to be considered are:

1. The Duration - how long the Company's propose that the CVA should last. This may need to take into account legal action for the collection of sums due to the Company.
   
   
2. Voluntary contributions - how much the Company can afford to pay each month (or such agreed terms) towards its creditors in the CVA. Also, is there a third party willing to pay a lump sum into the CVA, which the creditors would not get in a Winding Up.
   
   
3. Costs - in a CVA, the only major professional costs are for the Nominee and the and the Supervisor. The Nominee is the Licensed Insolvency Practitioner responsible for calling and chairing your Creditors' Meeting. The Supervisor, usually the same person, is the Licensed Insolvency Practitioner responsible for overseeing the CVA once it has been agreed. The costs of preparing the CVA Proposal are payable by the Company separately. However, the Nominee's and the Supervisor's costs will come out of the CVA (i.e. the Company does not pay them separately) and will be considerably less than the costs of a Winding Up, so the creditors will receive more.
   
   
4. For a guide to fees these can be found in the Statement of Insolvency Practice (SIP) No.9 go to http://www.r3.org.uk/publications/?p=80