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Company Voluntary Arrangement
What is a Company Voluntary Arrangement?
A Company Voluntary Arrangement (CVA) is a procedure whereby a company can continue to trade even though it is insolvent – in other words, the company cannot meet its ongoing liabilities from the cash flow that is being generated from the company.
Why Choose a CVA
A CVA is to be used (rather than a Creditors Voluntary Liquidation) if the company has already or is likely to return to profitability in the near future and the debts can be paid off over an extended period of time. The CVA is a tailored plan to repay to creditors, usually over a 3 year period, what the company can afford to pay – typically, this is between 25 to 60% of the total debt.
Is this the Right Choice for Your Business?
It should be possible to identify the reasons why the company has got into difficulties, and how these problems will not recur in the future. A Company Voluntary Arrangement is sometimes used if there is good reason to keep the company trading, such as a license agreement, or other contractual agreements, that could not be transferred to a new company.
What is the CVA Procedure at Griffin & King?
First of all we carry out a full review of the trading position of the company, and assess the future trading position. During this review process, decisions can be made about any redundancies or other cost-cutting steps. Based on this realistic assessment of the viability of the company, we would agree with you the plan that the company could afford to put forward to creditors. This is called the offer to creditors, or more formally, the proposals. In practice, the amount repaid is likely to be less than 100%, and may be as low as 25% to 40%.
We Handle all the Delicate Negotiations
As part of our work, we will speak to the company bankers, the tax man, and any other major supplier to explain the plan in more detail and get their support. These are delicate negotiations, and not all insolvency practitioners have the experience or expertise to deal with this.
Binding the Agreement
Once the detailed report of the financial position of the company and offer to creditors has been finalised, this will be filed in court, and a meeting of creditors called. At the meeting of creditors, it will be necessary to have at least 75% of the voting creditors voting in favour of the offer you have made for the CVA to become a binding agreement between the company and its creditors.
Becoming the CVA Supervisor
In practice, so long as the report and offer to creditors has been well thought through, it is likely that the creditors will agree. Up to the point of the agreement by the creditors, I'm referred to as the nominee. After the creditors' meeting, I am the supervisor.
Our Efficient Service
We make sure that Company Voluntary Arrangements happen as quickly as possible, as time in these circumstances is often scarce. It will usually take about 14 days from your initial meeting with us to the report being filed in court. There then needs to be a further 14 days' notice given to the creditors of the meeting.
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