Purnells
Corporate and Personal Recovery
Search     Go
The Older - but still useful type
Back
Credit Card

Older Type of CVA - Type of CVA that has no protection from creditors in the limbo period

Protection sometimes not needed - This type of CVA provides the benefit of cheaper insolvency costs

 

 

There are two types of Company Voluntary Arrangement (CVA). The older type of CVA provides no legal protection for your company from creditors enforcement actions in the period between putting the proposal forward to creditors and the date of the creditors meeting.

 

With the  older  type of CVA we call that period the limbo period - The period when your company is not protected from its creditors.

 

This "limbo" period is usually about four weeks long - and runs from the date your Company Voluntary Arrangement proposal is filed in court to the day of the creditor's meeting at which your CVA proposal is considered.

In this period creditors action can continue against your company

For example:

  • Your company bankers on reading the proposal could decide to immediately appoint their "own man" as Administrative Receiver.

 

  • Financial companies would be alerted to the company's difficulties on reading the proposal and might then seek to repossess the assets subject to the financial agreements.

 

  • A winding up petition could be heard, and the company could be placed into liquidation.

 

All or any of such events could result in the CVA proposal being a non-starter. In periods of severe stress then a new CVA ought to be proposed so as to gain the benefit of the moratorium (freezing of creditors enforcement actions) period.


An old type CVA will still be appropriate for cases where such potential problems could not arise.


As with all things it is a question of balance weighing the pro's and con's of each type of CVA to the particular financial circumstances of your company.  The older type of Company Voluntary Arrangement provides a cost benefit compared  to the other type of CVA as the insolvency practitioner involved has less legal responsibilities (therefore less insolvency costs) in the period leading up to the creditors meeting. For more information or for a free meeting please email us.