Voluntary arrangements

A company voluntary arrangement (CVA) is where a deal is formulated between the company and all of its creditors

The procedure is an alternative to liquidation

Procedures

1 Proposals and a statement of the company's affairs are formulated
with the assistance of an Insolvency Practitioner (IP)

2 A meeting of creditors to consider the proposals is convened
at which a 75% majority in value of creditors attending is required

3 A meeting of the shareholders is also required to approve the
arrangement made

4 The CVA is implemented and the client pays into a fund held by
the IP acting as the supervisor

5 Creditors are repaid regularly over the term of the arrangement

Practical

Secured creditors are not and cannot be affected by a CVA without their express consent

The directors remain in office throughout the course of the CVA. There is no 'standard' CVA proposal but in every case, the company must have a viable core business

Proposals can be based on :

» Profit contributions

» Sale of surplus company assets

» Higher realisations of book debts or sale of assets at going concern
values

..or any combination of these

The proposals can be flexible and can incorporate the specific requirement of the company

Advantages over Liquidation

The costs of operating a voluntary arrangement are lower than the costs of a liquidation. There are advantages to all parties, such as :

» Creditors receive higher dividends

» The company survives and the directors continue in office

» Employees' jobs are protected

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