DON’T DELAY WITH A CVA!
We often speak to accountants and creditors that they have received a Company Voluntary Arrangement (CVA) proposal in the post and they have no idea what it means or what to do with it. This article proposes to briefly answer both of those questions, and tell you how we can help.
In short, a CVA is a legally binding agreement between the company and its creditors that enables the company to freeze all unsecured debts and repay them over a period of time from the future trading profits of the company. The company can write off a significant proportion of its debts, if the support of its creditors can be obtained. Changes must be made to the way the business is run to ensure the successful completion of the CVA and future of the business post-insolvency.
A CVA should not be ignored because if it is accepted by 75% of those voting (present or by proxy, and calculated by value of the debt) then all creditors will be bound by the proposal. Therefore, if only one creditor votes in acceptance and all others fail to vote, all creditors are bound. It is therefore very important to ensure your vote is counted.
When reading through the proposal, you will want to see how much the creditors are going to be paid, and how that amount has been calculated. You may also look to see how different classes of creditor are being treated, and what changes the Company proposes to make to ensure future success.
A creditor has the right to vote for the acceptance or rejection of the proposal, and also for acceptance with modifications. Each creditor may suggest modifications, for example if you think that an expense listed is excessive, you can request that this be paid into the proposal instead. Alternatively, you may see that the Directors themselves are listed as creditors and propose to receive a dividend so you may request that they abstain from receiving any dividend. Clearly these modifications would increase the dividend payable to unsecured creditors. These are only examples – the whole proposal should be read and each clause assessed according to each creditors wishes.
We realise that checking through a CVA proposal in detail may be quite a tedious and perplexing task and therefore we are able to do so on behalf of a creditor, ensuring that any relevant points are brought to the creditors attention and suggesting changes to the proposal that the creditor could put forward. If required we can submit proxies on behalf of the creditor and also attend the creditors meeting. Please contact us for more information on this service: 01702 344558.