What is a CVA (Company Voluntary Arrangement)?
A CVA is a legally binding proposal in which companies agree with creditors on a appropriate payment agreement spanning up to 5 years.
In this period, the company agrees to pay back the debts owed, allowing a company to save itself from severe financial distress by paying arears in instalments rather than large lump sums.
The catch of a CVA is often the creditors’ approval. In order for a CVA to be approved and agreed the creditors must agree in a majority of at least 75%, which can sometimes be more difficult than envisioned.
However, the appointed IP (Insolvency Practitioner) is an expert in these procedures and will assess the situation and formulate an appropriate plan to increase the chances of approval.
This recovery solution has been a popular choice since its inclusion in UK law in 1986, as it allows companies and their Directors to retain the majority of their powers and remain trading.