What Is A Company Voluntary Agreement

The CVA is legally binding and allows the insolvent company to repay part of its debts over a period of 1 to 5 years. If you think a CVA might be the right thing to do for your business, keep reading about how it can help your business survive. To be effective, a CVA must be approved by the necessary majorities of the company`s creditors and shareholders: once adopted, creditors are prevented from threatening the company or taking legal action as long as the agreed terms are met. Interest and fees are generally frozen, making total debt more manageable. The directors of the company, a director (where the company is in management) or a liquidator (where the company is in liquidation) may submit to the company and its creditors a proposal (proposal) for a CVA. Neither creditors nor shareholders have the authority to propose a CVA. Directors have a legal obligation to act properly and responsibly and to put the interests of their creditors first. Risks associated with winding up a business may include disqualification from the activity of director of other companies, as well as personal reputation as a director. In extreme cases, directors may be personally considered to be subject to assessment for erroneous payments to creditors.

However, since a voluntary agreement of the company is in the interest of creditors, there is no investigation into the director`s conduct. The content of the CVA proposal is legally obligated to comply with the guidelines of the 1986 Insolvency Regulation – Rule 1.3. A typical CVA contains basic information about the insolvent company and the designated candidate, who must be a certified judicial administrator (i.e. names, addresses and contact information). There will be a detailed introduction to the company`s business, including information about employees, profits and major transactions or events. The liquidator you appoint works with your company`s directors to make this section as accurate and detailed as possible. After the introduction will be the main proposals, followed by information on the creditors and the company`s debts. Remember that you must be prepared to provide documents and facts about your business while writing the CVA. If the directors` current accounts are debited, repayments can be made over a period of time, possibly by rewarding a share of salary, in order to reconcile them.

This reduces the pressure on individual managers and allows them to repay what is due to them at a reasonable price. While a CVA may appear as an attractive prospect, not all companies will be eligible for an attractive prospect. This is because at least 75% (in value) of voting creditors must approve the implementation of the AIC before it becomes legally binding. A creditor can probably only accept such a procedure if it is certain that the company can maintain payments during the CVA period. It is a legally binding agreement that binds all creditors, provided that the proposal is accepted by more than 75% of the creditors` votes. A Judicial Administrator (IP) monitors the terms of the agreement and is known as a supervisor. A CVA represents a voluntary agreement of the company, i.e. a structured payment plan with creditors.

If you need help with the organization, please contact us. The proposal is reviewed and voted on by the company`s creditors in a admissible procedure that includes e-mail, correspondence and virtual meetings.