A Company Voluntary Arrangement (also known as a CVA) is a special arrangement that allows a company with debt problems or that is insolvent to reach a voluntary agreement to pay its business creditors over a fixed period of time.
The arrangement is similar to the Individual Voluntary Arrangement (IVA) that can be used by a sole-trader or self-employed person who is unable to pay their debts.
An application for a CVA can only be made with the agreement of all directors of the company in question or all of the partners of a limited liability partnership (LLP). A CVA can only be created by using the services of an insolvency practitioner. They will be responsible for set up and administration of the arrangement.
Once an insolvency practitioner has been appointed the following steps will take place:
- The insolvency practitioner will work out an ‘arrangement’ covering the amount of debt the company can pay and a payment schedule. They must do this within a month of being appointed.
- The insolvency practitioner will write to creditors about the arrangement and invite them to vote on it.
- A CVA must be approved by creditors representing at least 75% of the debt value of those who vote (rather than 75% of the total overall debt).
If the agreement is approved and the company does not meet the terms of the CVA then any of the creditors can apply to have the business wound up.
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