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Looking to liquidate your business? For help call 0300 303 8284
Looking to liquidate your business?
For help call 0300 303 8284

The CVA process

By entering into a Company Voluntary Arrangement your business is protected from any further actions from creditors (e.g. winding up petitions). The terms of the CVA can be spread out as per your business requirements, and once approved, stops immediate demands for repayments from existing creditors.

What happens when you enter into a Company Voluntary Arrangement?

1. Firstly, you should understand whether a CVA is the right course of action for your company and the creditors of your business. A qualified Insolvency Practitioner will be able to advise you on whether there are other potential outcomes which may be better for your circumstances. If you believe a CVA is the right outcome, it may well be, but we are more than happy to discuss this with you before you begin the process.

2. Once you have discussed your circumstances, and it has been agreed with an Insolvency Practitioner that a CVA is most appropriate, you will appoint them to draft a CVA proposal for your creditors.

3. Before issuing the CVA it must firstly be approved by the directors of the company, and any revisions made where needed. The directors should agree that the payment terms suggested in the CVA are agreeable and that the company can meet them, otherwise this may void the agreement down the line.

4. Once accepted by the directors, it will then be filed with the Court. The CVA which has been accepted by the directors is granted, and signed copies of the proposal are sent to the creditors of the business. Three weeks must pass before a creditors’ meeting is held (please note as October 2016 the rules regarding creditors’ meetings shall be amended).

5. The Insolvency Practitioner then calls a meeting with all the company’s unsecured creditors. It is quite common for creditors not to attend the meeting, or they may send a representative to attend on their behalf. Or even, just simply accept or reject the CVA by post. At the meeting, the creditors are given a chance to question the terms of the CVA – these meetings are handled by the Insolvency Practitioner, not the directors.

Whilst some directors feel that they are “handing the reins” of their business to the Insolvency Practitioner, it’s important to remember that with a CVA, they are also dealing with all of your creditors – meaning you do not need to deal with often disgruntled creditors.

6. At the creditors’ meeting a vote will be held, with the CVA only being passed if the creditors’ responsible for 75% or more of the unsecured debt vote in favour. Similarly, any revisions must carry the vote of the 75% also.

 It’s important to listen to the advice of your qualified Insolvency Practitioner throughout the drafting of the CVA – they will have a great deal of experience in drafting the terms of the CVA, and are likely to have a better understanding on the terms your creditors will accept and reject. Shareholders must also vote on the CVA, with at least 50% needing to vote in favour of the approval of the CVA.

7. If both the shareholders’ meeting and the creditors’ meeting receive the appropriate votes in favour of the CVA, the Insolvency Practitioner (also referred to as the Chairman) will report to the Court and all of the creditors of the company explaining what the outcome of the meeting was, who was present and how each member voted.

8. Once the CVA has been approved and agreed, any legal actions (e.g. winding up petitions) are frozen, unless the CVA is defaulted on. It is therefore imperative that you ensure you can meet the terms of the CVA and then continue to, otherwise legal actions can commence against you again.

9. The company must then make regular contributions to a trust account in order to make the payment agreed in the terms of the CVA. As long as the business continues to make the agreed payments, then it can carry on trading without the threat of being put out of business. If the payments are not made, it is likely that the company will be put into compulsory liquidation.

Once the CVA has been approved, you can rest assured that your existing creditors cannot commence legal action against your company for the previous debts, ending your sleepless nights as a director and putting your business on the road to recovery.

Contact The Insolvency Experts

For a no obligation discussion about whether entering a CVA is right for you, call us now on 0300 303 8284. To get more advice or information you can also contact The Insolvency Experts online. You can also find more information by choosing one of the options below.

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The CVA process
michael beal