What is a Company Voluntary Arrangement? - How a CVA can help Your Business
Free Company Voluntary Arrangement Advice - Guide - CVA Case Studies - Law - Rules
When your company cannot meet its debts when they fall due, a Company Voluntary Arrangement proposal (CVA) may be the best option available to your company to relieve creditor pressure. For instance a CVA can help avoid a winding up petition.
The purpose of a Company Voluntary Arrangement or CVA is to propose a 'deal' with the creditors. When a deal is agreed that prevents the creditors taking any enforcement action against the company. The deal you propose could, for example, be:
- To effectively obtain interest free extended credit over, say, four years (In other words the existing debt is repaid over four years by instalments)
- Or that only 50% or some other percentage of the total debt is repaid by instalments.
A CVA Proposal is drawn up by the directors with the help of an insolvency practitioner and is then forwarded to all of the creditors. The law sets out the minimum level of information that must be contained in the CVA proposal but not what the offer to creditors should be.
The index on the left hand side of this page shows that there are two distinct legal types of CVA:
- The first type of Company Voluntary Arrangement on this site we call an "old CVA", was introduced into law by the Insolvency Act 1986. This type of CVA continues into the future alongside the "new CVA".
- The second type of CVA gives directors powerful options when their company is under stress. This type of CVA was introduced into law by the Insolvency Act 2000 but only became available to be used as and from the 1st January 2003. This new type of Company Voluntary Arrangement gives the company the benefit of a "moratorium" during which time the creditors cannot take enforcement action against the company. This breathing space period allows the directors time to formulate a way forward which will hopefully provide a better result for the creditors, employees, creditors and stakeholders.
By reading the CVA case studies you will see that there are many different ways you could structure your own company's Company Voluntary Arrangement proposal.
If you wish to read up the nitty gritty of all of the statute law relating to Company Voluntary Arrangements you can read on this website,
- Sections 1 to 7B of The Insolvency Act 1986
- Paragraphs 1 to 45 of Schedule A1 to The Insolvency Act 1986
- Rules 1.1 to 1.56 of The Insolvency Rules 1986
Those Sections, Paragraphs & Rules can be a bit hard going to read without some detailed prior knowledge. We are happy to provide you with free practical advice both on the CVA law and how you can get that law to work for your company.
A Company Voluntary Arrangement could help your company avoid statutory demands, winding up petitions or any other type of creditor collection action. In addition the effect of a CVA is to relieve your company of creditor pressure either by the elimination of much of that debt or by clearing the debt over several years.