It is a statutory contract between a company and its creditors. Like any contract it can be highly flexible to suit the circumstances. For it to bind all creditors it must be approved by 75% in value of creditors that bother to vote. Often the terms of the contract involve freeing interest and allowing the company to pay back only part of its debts over a period of three to fives years.
When would you use a CVA?
When it is insolvent but the business is viable (once restructured) and you are able to pay creditors more than they would get in a liquidation. If is a really good way of restructuring the debt plus it keeps the company under the control of the directors, using other insolvency procedures such as liquidation or administration would mean that directors lose control. The purpose of a CVA is to help the company survive avoiding liquidation or closure.
If you wish to discuss how a company voluntary arrangement could help your business survive or need general insolvency advice the earlier you talk to us the better as you may have more options. Call us today on 0800 331 7417