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Would Your Business Benefit from a CVA?
Whilst a Company Voluntary Arrangement (CVA) is a legally binding agreement, it is basically a deal between an insolvent company and its various creditors. The deal is detailed within the terms of the CVA proposal to be circulated to the creditors and shareholders of the insolvent company for their formal approval at subsequent meetings.
The deal will need to show the creditors and shareholders of the insolvent company why they would be better off approving the CVA proposal versus rejecting the CVA for an alternative insolvency method (such as a CVL).
The terms and obligations of the deal are detailed within the CVA proposal and these will detail how much and when the insolvent company is required to pay contributions to the supervisor of the CVA. The CVA will also provide creditors with the estimated level of recovery to the insolvency company’s creditors (i.e. whether the creditors will be repaid in full or in part for the debt due to them).
The usual term a CVA is in place is anything up to 60 months, with the insolvent company paying contributions to the supervisor in accordance with the terms of the proposal (e.g. this can be a contribution from ongoing profits or a fixed amount, say on a monthly basis).