Corporate Voluntary Agreement
“offering protection from creditors”
A Corporate Voluntary Arrangement is where there is an agreement with your creditors to allow you to keep control of your company and continue trading. It is the obvious choice if trying to avoid liquidation.
This type of arrangement is literally an agreement with your creditors and what amounts they can expect to get paid in the future. Obviously it has to be agreed between the company and its creditors, at least 75% of the creditors must be in agreement.
It can be agreed where all or part of the company’s debts will be repaid over a period of time from the future trading profits of the company or as cash flow allows. It may be that not all debts will have to be repaid, but only a certain percentage. This may be acceptable to creditors as the CVA may offer more to the creditors in the long term if liquidation is avoided.
The benefits of entering into a CVA can be:
Protection from creditors
Protection from a winding up order
Terminating employee contracts
Lower costs than going into administration
Avoiding full liquidation
Ability to trade out of a problem