How to start a CVA

There are various steps required to start a CVA. It will normally take 6-12 weeks to put in place.

  • Decide if a CVA is right for your Company
  • Appoint an Insolvency Practitioner
  • How is a CVA Agreed?
  • Paying the Arrangement

Implement Company Voluntary Arrangement

Company Debt Expert James Falla describes the process of implementing a Company Voluntary Arrangement (CVA). For more business debt advice visit

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Decide if a CVA is right for your Company

Before the decision to start a CVA (Company Voluntary Arrangement) can be taken the directors must review company’s financial position. A full list of the company’s creditors must be produced. In addition accurate cash flow forecasts will have to be generated. Statutory accounts may also have to be brought up to date.

This information is used to assess how much the company can afford to repay to its creditors and when these payments will be made. The way the company will be managed and resourced going forward will also have to be considered.

The Directors must then hold a special meeting of the Board to formally agree to move forward with a CVA. An Insolvency Practitioner must then be appointed.

Appoint an Insolvency Practitioner

In order to start a CVA the Directors need to the help of a licensed Insolvency Practitioner (IP). This person is legally qualified to propose the Arrangement to the creditors. The IP will also supervise the Arrangement once it is accepted.

The Insolvency Practitioner will normally speak to any major creditors to assess their willingness to agree. They may also decide to apply to the court for an Interim Order.

At this stage the company will normally stop paying most or all of its unsecured debts including HMRC. This should provide a significant cash boost to the company. Payments to creditors that are key suppliers can be maintained.

The company can apply for an Interim Order to protect it from creditors for a period of 28 days. This allows time for the CVA to be agreed.

CVA Proposal Drafted

Once all the necessary financial information about the company has been gathered the IP will draft the CVA proposal. This includes a summary of the company’s current trading position and cash flow forecasts.

The proposal will also included a statement detailing how much the company intends to repay to its creditors and when these payments will be made. There will also be a comparison to what the creditors might be likely to receive if the company was liquidated.

Once drafted the directors have to sign off the proposal. A copy is then forwarded to all known creditors and other interested parties. Normally creditors are then given 21 days to review it.

How is a CVA Agreed?

After 21 days a Creditor Meeting is held. At this meeting the creditors will be asked to vote for or against the acceptance of the Arrangement. They may attend the meeting in person or send written confirmation of their vote to the IP beforehand.

In order for the Arrangement to be accepted 75% of the value of the creditors who decide to vote must agree. It may be approved with or without modifications. If there are modifications the IP will confirm with the Directors whether they are in agreement to these. Once approved Arrangement binds all included creditors to its terms irrespective how they voted.

The company Director or Directors will normally attend the Creditors Meeting in person. The meeting will be chaired by the Insolvency Practitioner.

Maintaining the Terms and paying the CVA

Once the CVA is accepted the company has a responsibility to maintain the payments to creditors as agreed. The Directors must ensure that the company is run efficiently so that these commitments are honoured.

As long as the payments are maintained once the Agreement is completed all outstanding debts will be written off. The business can then continue to trade debt free. However if the payments are not made the Arrangement could fail.

The Directors should consider how new ideas and energy might be brought into the company to ensure the CVA is successful. This does not necessarily mean there has to be a change of management. However at the very least it is sensible to consider the use of external business advisers or a non executive director.

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