What is a CVA?

• This procedure enables the directors to put proposals to creditors to settle or compromise their debts through a formal arrangement which binds all creditors.

What is the purpose of a CVA?

• The procedure is usually used when the company is viable and can continue its business but has current debt problems.

• Unlike other insolvency processes, it allows control of the company to remain with the directors who can continue to trade, although the arrangement is under the control of a Licensed Insolvency Practitioner who acts as Supervisor.

How do you place a company into CVA?

• With the assistance of a Licensed Insolvency Practitioner (who at this stage is called the Nominee), the directors prepare a proposal to put to the company's members and creditors.

• The proposal can make any number of suggestions of how the company proposes to settle or compromise the debts due to creditors. However, in practice, the directors must offer creditors a better outcome than they would expect to receive if the company was placed into another insolvency procedure.

• The Nominee reports to the court whether, in their opinion, the proposal should be considered by the company's members and creditors.

• The proposals are sent to the company's members and creditors for their consideration.

• Modifications to the proposals may be proposed by the members and creditors.

• Creditors are asked to vote on the proposal by a decision procedure. If 75% in value of creditors vote to approve the proposal it is binding on all creditors that received a copy of the proposal and were entitled to vote.

• A meeting is then held for the members of the company to pass resolutions approving the CVA.

• If the proposal is approved, the Nominee becomes the Supervisor and implements the arrangement.

• If there is pressure from creditors or an impending petition, a moratorium (period of protection for the company from action by creditors) can be sought at the outset to protect the company and its assets.

What are the duties of the Nominee/Supervisor?

• Nominee

  • To assist the directors in preparing a viable proposal to put to members and creditors.

  • To report to the court on the likelihood that the arrangement will be successful.

• Supervisor

  • To ensure the directors adhere to the terms of the arrangement.

  • To agree creditors' claims.

  • To collect and distribute funds to creditors.