Company voluntary arrangement has been around now for over twenty years and could be the solution to a business going through a tough financial situation. A company voluntary arrangement, or a CVA, is a contract between the insolvent business and their creditors to repay some or all of their debts with future profits. It’s an answer for those companies who don’t want to go completely bankrupt and a solution for creditors to at least receive some of the money they are owed.
A CVA does not just consist of two sides coming up with an agreement to pay back money. It goes much deeper than that. To start with the CVA process, one must believe that their business can come back and be profitable. Then this person must contact a legal professional who can write out a CVA. In most cases these people come to the business place and find out what may be the problem. After reviewing data and seeing the company first hand, a CVA is written and changes are made. The managers and owners still remain in control of their company, but are asked to make slight changes that could turn the company around. The CVA from here is filed at the county court before finding its way into the creditors’ hands. Before being approved, a 75% approval rate must be obtained for the CVA and meanwhile a second vote process is ongoing. A second vote is happening where a 50 % in favor must be reached by the shareholders of the business. After all this is passed, a CVA takes action.
A CVA is a long and grueling process but is the key to a number of insolvent businesses who have the potential to make the company profitable. Before considering a CVA one must really evaluate if this is the answer for them or not.