A freeze on creditors actions? - Two types of Company Voluntary Arrangement
Two legal types of CVA -One with a freeze on creditors in the period leading up to the creditors meeting and one without
There are two distinct types of Company Voluntary Arrangement (CVA) proposal and the following pages explain the pros and cons of each type.
Clearly once a CVA is approved by creditors at a meeting all enforcement actions by those creditors thereafter are frozen. That is because all those creditors are now bound by the approved company voluntary arrangement. The approved CVA effectively forms a contract between the company and its creditors.
There is a period, however, usually of about one month between sending a CVA proposal to creditors and the date of the meeting at which that proposal is considered. It is at that meeting that the proposal is then approved or rejected. In the period leading up to the Company Voluntary Arrangement creditors meeting however:
- The one type of CVA does not provide a freeze on crediors enforcement actions.
- The other type of CVA does provide a freeze on any enforcement activity by creditors. In legal terms the freeze on creditors actions is called a "moratorium".
If you are having a Company Voluntary Arrangement proposal prepared check that a moratorium (or freeze on creditors actions) is obtained if needed.
The index to the left of this web page provides information on the additional differences between the two types of CVA apart from the freezing issue.