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What is a Company Voluntary Arrangement?

Source: HM Revenue & Customs | | 26/02/2019

A Company Voluntary Arrangement or 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 more well-known 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 realised by using an insolvency practitioner who would be responsible for setting up the arrangement and administering it.

Once an insolvency practitioner has been appointed, the following steps will take place:

  1. 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.
  2. The insolvency practitioner will write to creditors about the arrangement and invite them to vote on it.
  3. To get a CVA, it must be approved by creditors who are owed at least 75% of the 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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