A ‘CVA’ is a Company Voluntary Arrangement with creditors, which allows the business to pay its debts off over a fixed period of time. The business continues to trade as normal and is protected from creditors taking action against it. Creditors tend to support businesses choosing to enter a CVA as the other option may result in little or no repayment of what they are owed. The CVA however must be reasonable and achievable The CVA proposal:
- Must be reasonable and achievable
- The company must be insolvent but still viable
- must be approved by 75% of creditors.
Once approved the CVA forms a legally binding agreement that binds all creditors to the agreement whether they voted in support or against the CVA.