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Institute of Chartererd Accountants


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Your Questions on Company Voluntary Arrangements

What is a Company Voluntary Arrangement (CVA)?
This is an arrangement between the Company and its creditors to enable a dividend to be paid in full and final settlement of the company’s obligations, by either a lump sum or over 3-5 years depending upon income from future trading.

What are the advantages/disadvantages of entering into a CVA as opposed to Administration or Liquidation?

• directors retain control of the company 
• possible survival of the company as a going concern. 
• creditors usually receive more than in a winding up .
• it is more cost effective than the appointment of an Administrator or Liquidator. 
• if approved, all creditors as at the date of the meeting will be bound by the terms of the arrangement. 

• the proposal will require the support of the secured creditor, as their security rights are not effected by a CVA 
• if the arrangement fails, administration or liquidation are likely to be the only remaining courses of action available to the directors, and 

Who prepares the proposal?
A director of the company prepares a proposal for approval by the nominee (in reality we will assist directors with preparing the proposal). 

What should be included in the proposal?
The contents of a directors’ proposal should include the following (this is not an exhaustive list): 
• why a voluntary arrangement is desirable .
• details and estimated values of the assets of the company. 
• what assets are charged in favour of creditors 
• whether any assets are to be excluded from the voluntary arrangement 
• the liabilities of the company.
• Any claims or potential claims  in respect of any transactions at an undervalue, preferences, extortionate credit transactions or invalid floating charges. 
• the duration of the voluntary arrangement, dividend amounts and payment dates to creditors. 
• whether for the purpose of the arrangement, any guarantees are to be offered by directors, or other persons, and whether (if so) any security is to be given or sought.

How many creditors need to approve the CVA proposal?
The CVA proposal needs to be accepted by in excess of 75 per cent by value of the creditors and in excess of 75 per cent by value of members. 

Which creditors are bound by the proposal?
The proposal will bind all creditors who were entitled to vote at the creditors meeting, whether or not they had notice (subject to certain exceptions). 

What are the duties of the Supervisor?
These are detailed in the proposal document, but generally include a duty to monitor the company’s compliancy with the terms of the proposal and keep all those with an interest in the arrangement informed of its progress

What powers does a Supervisor have?
In addition to the powers defined in the proposal, the Supervisor has the power to apply to court for an order for directions on any issue pertaining to the CVA and the

power to present a petition for the winding-up of the company. 

When will the Arrangement come to an end?
When the terms and conditions of the Arrangement have been fulfilled, namely the payment of dividends as agreed. Alternatively, the arrangement will be concluded if the company has failed to adhere to the terms of the arrangement, or if a new creditor issues proceedings.

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