Company Voluntary Arrangements (CVA)
A Company Voluntary Arrangement (CVA) is a flexible tool for restructuring the finances of a company that is struggling under the burden of debt but is still a viable business. The directors remain in control of the company and work together with the CVA supervisor to find a way to trade out of their financial difficulties.
A CVA is a contractual compromise entered into between a company and its creditors. The approval of a CVA requires the agreement of not less than 75% of those creditors, in value, voting on the proposal. If the creditors include connected parties, the CVA also requires the approval of more than 50% of the unconnected, unsecured creditors, in value, voting on the proposal. Shareholders holding more than 50% of the company’s voting shares should also agree. Whilst secured or preferential creditors are not bound by the CVA unless they consent, all unsecured creditors are legally bound to accept the terms of the arrangement – including those who did not vote or did not receive notice of the meeting.
Typically a CVA proposal will provide for a proportion of the debts to be repaid over a fixed period of time by monthly contributions paid to the CVA supervisor.
Other options could be agreeing to a disposal of assets or the introduction of fresh capital. The creditors may require the CVA proposals to be amended or modified before the CVA is approved. All involved parties are contractually bound to adhere to the terms and conditions set out in the CVA which will include regular reporting by the directors to the CVA supervisor.
Company Voluntary Arrangement Services
Mercer & Hole has the experience and expertise to advise on and assist with the preparation of realistic trading projections and affordable repayment proposals for creditors.
Mercer & Hole’s experience is that creditors are usually willing to support a CVA - even though they may be unlikely to recover all that they are owed - as long as the proposal is fair and reasonable and provides a return to them which is more than they might receive if the company was to be placed into liquidation.
At Mercer & Hole our Licensed Insolvency Practitioner Partners and Directors have assisted with the financial restructuring of many financially distressed companies struggling with cash flow problems or facing threats from creditors using the CVA process.