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A Company Voluntary Arrangement (CVA) is a completely different alternative to placing your company into a Liquidation.
A Liquidation would mean the end of the company, however, (if approved) a CVA would ensure the survival of your company into the future.
First of all, we would produce a CVA proposal on behalf of the company which would be sent to all creditors. The proposal would set out the offer being made to creditors in full and final settlement of the debts outstanding to them.
At the creditors meeting, the votes would be counted (most creditors vote via postal proxy and do not attend at the creditors meeting in person). For a CVA to be approved, greater than 75% in value of those creditors voting, must vote in favour.
EXAMPLE - Company owes a total of £500,000 to creditors. One of those creditors is owed £1,000. If that creditor is the only creditor to vote in favour of the proposal (with no other creditors bothering to vote) then the votes cast would be 100% in value of those voting, voting in favour. The CVA would be approved and would bind all creditors (not just those who voted).
When a CVA has been approved by creditors, the company has the benefit of the courts moratorium, whereby no CVA creditors are able to commence or even continue any recovery action against the company.
There are normally 2 different types of offer made to creditors within a CVA. The usual offer is the payment of a monthly set sum into the arrangement (as calculated by cashflow forecasts) over a set number of years. That pot of money would then be distributed to creditors as a dividend in full and final settlement of their debts.
Alternatively, a "lump sum" offer could be made to creditors in full and final settlement of their debts. EXAMPLE - Mr Jones, director of ABC123 Limited, has £50,000 personal monies which he is considering investing into his business. He is aware, however, that this £50,000 is insufficient to pay all creditors in full. He knows that he could potentially lose the £50,000 if one of the creditors (who hasn't been paid) commences court action and winds the company up. His £50,000 would effectively then have "gone down the drain". He could instead propose a CVA to the company creditors offering the £50,000 in full and final payment of their debts. Should creditors agree, then he know that his investment would have ensured the survival of the company as a going concern and he will not have wasted his money.
To discuss a CVA and all other insolvency options available to your company, contact Suzi Purnell on 01633 214712 or e-mail: email@example.com to arrange a free, confidential meeting, which could take place either at our offices in Newport, or on the telephone.
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