Company Voluntary Arrangement

What is CVA?

A CVA is a procedure that enables your company to put forward a proposal to its creditors that asks them to agree to accept a certain sum of money in settlement of debts due. The proposal ring fences the debt up to the point it is created and becomes part of the agreement. All future debt incurred is your company's responsibility and must be paid on time as agreed in the normal trading terms.

The proposal is very flexible and is put forward by your company, on your terms, but

however, your creditors can modify it. It requires the agreement from at least 75% in value, of your creditors whether or not they voted in favour of it. Your company can then pay a monthly contribution, a one-off bullet payment based on asset sales, or a mixture of both. The appointed Supervisor of the arrangement then distributes the money to creditors after the professional costs of the arrangement have been paid.

What do I have to do?

As a director you will be asked to provide to the Nominee a list of your assets and liabilities, and a projected cash flow forecast for however long you want the arrangement to last. A trading history is also required, detailing what your company does, how it has traded, why you want to go ahead with this type of insolvency and the reason why the CVA will be successful. Your company is formally in a CVA once the proposal has been approved at a meeting of creditors (usually within eight weeks of the notice of proposal). Directors will not usually be required to attend this meeting.

How will Armstrong Watson help?

When you initially approach Armstrong Watson we become appointed as Nominee. It becomes our job to value your company assets and help with the production of a statement of affairs that shows why a CVA would be more favourable to creditors than liquidation. Once the creditors approve the CVA, we then become Supervisors of the arrangement.

Our duties include:

• Assisting with the drafting of proposals
• Liaising with creditors to obtain the relevant approval
• Filing all necessary paperwork
• Handling all correspondence from creditors
• Monitoring the terms of the proposal
• Agreeing creditor claims
• Paying dividends to creditors after costs

How long does a CVA last?

The length of a CVA depends on:

• how long your company wants it to last for, and
• what are the level of creditors, and
• what your company can afford to pay into the arrangement for creditors to get a satisfactory return

How much does a CVA cost?

The Nominee/Supervisor is paid out of the arrangement and costs depend on the complexity of the case, and how long the arrangement lasts for. However, the Nominee may request a payment up front.