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    Rescue is always the first option...

A Company Voluntary Arrangement, commonly referred to as a CVA, is a deal offered to creditors where they are asked to accept a proportion of their debt in final satisfaction. A CVA can be proposed without the company first going into Administration (known as a “stand-alone” CVA), although this is relatively unusual. Administration is often used to provide time and protection from creditor action whilst a CVA proposal is put together.

Once the CVA proposal document has been sent to creditors, they get a chance to vote upon it at a meeting. The agreement of 75% of those creditors who take part in the voting is required for the CVA to take effect.

The CVA generally requires the company to make a monthly payment from their trading profits into a pot, which is then shared out proportionately to the creditors as an alternative to its assets being sold off. Therefore, it is the same company which continues into the future, rather than a new company being formed. This can be helpful where there are valuable contracts which are difficult to transfer to a new business.

A CVA cannot vary the rights of a secured creditor or landlord without their agreement and should generally provide for unsecured creditors to be treated equally.

CVAs are the least utilised form of corporate insolvency proceedings, although they are gaining popularity, particularly in retail cases. They are also sometimes deployed in “reverse-takeover scenarios” and where “equity-for-debt” schemes are being proposed.

At PCR we have particular experience in CVAs, not commonly found within smaller insolvency practices.

Please contact us if you are interested in discussing the possibility of a CVA for your company or need advice or representation in respect of a CVA in which you have been asked to participate as a creditor.

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