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This article just provides an overview of the law in this area. You should talk to our Disputes Team for a complete understanding of how it may affect your particular circumstances.
Charles Abraham, Head of Disputes explains what a company voluntary arrangement (CVA) is and highlights what the main advantages and disadvantages of a CVA are for a business.
What is a CVA?
A CVA is a procedure that allows a company:
When and how does a CVA come into force?
A CVA comes into force from the date that the company's creditors approve a CVA proposal made for that company. The approval of a CVA by a creditors' meeting requires a majority of over 75% (by value) of the creditors attending the meeting (in person or by proxy) to vote in favour of it.
What is the effect of a CVA on creditors?
Once approved, the CVA binds all the unsecured creditors of a company entitled to notice of the CVA proposal. This means that a CVA binds:
Does the company proposing a CVA have the benefit of a statutory moratorium?
Where a CVA proposal is made for a small company, the company can obtain a moratorium, which is similar to that which applies to a company in administration.
How can a creditor challenge a CVA?
A creditor that was entitled to notice of the CVA proposals and feels unfairly prejudiced by the CVA may apply to the court for an order revoking the CVA or convening more meetings to consider a revised CVA. A CVA can also be challenged on the grounds that there was an irregularity in the conduct of the meetings called to consider the CVA proposal.
What happens if the debtor company does not comply with the terms of the CVA?
The terms of the CVA will deal with this in most cases. The CVA will often provide that, on the debtor company's default:
What are the advantages and disadvantages of a CVA?
If you have any queries in relation to this post, please contact our Head of Disputes, Charles Abraham on 0113 201 0405.
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