A Company Voluntary Arrangement is a legally binding agreement between the company and its creditors detailing how the company will settle, or compromise its debts, which enables trading to continue and a scheme of repayment to be agreed with creditors. This allows an eventual greater financial return to creditors, albeit often over time, than they could expect if the company went into liquidation.
The arrangement aims to allow survival as a going concern or the enhancement of asset realisations.
A CVA is often appropriate when there are temporary cash flow difficulties, for example, as a result of a large bad debt. A CVA can provide a large degree of flexibility with a minimum level of disruption to the company, allowing the directors to retain control throughout.
The directors prepare a proposal, with the assistance of MPH Recovery and a meeting of creditors is convened, whereat, the proposal is put before creditors who have the option to accept, modify or reject it.
If creditors accept the CVA, an Insolvency Practitioner from MPH Recovery will be appointed to supervise it.