Company Voluntary Arrangements
A company voluntary arrangement is a procedure which enables a company to put a proposal to its creditors for a compromise in satisfaction of its debts. The compromise is an agreement under which creditors agree to accept a certain sum of money in settlement of the debts due to them. The procedure is extremely flexible and the form which the voluntary arrangement takes will depend on the terms of the proposal agreed by the creditors. For example, a CVA may involve delayed or reduced payments of debt, capital restructuring or an orderly disposal of assets.
The proposed arrangement requires the approval of at least 75% in value of the creditors voting in the arrangement and once approved is legally binding on the company and all its creditors, whether or not they voted in favour of it. There is limited involvement by the court, and the scheme is under the control of a licensed insolvency practitioner acting as a supervisor.
The CVA procedure was introduced by the Insolvency Act 1986 and was designed primarily as a mechanism for business rescue.
A modified CVA may also be applied to insolvent partnerships.