Company Voluntary Arrangement – CVA
or for an LLP, a Partnership Voluntary Arrangement – PVA
A Company Voluntary Arrangement is a procedure which enables the company to put a proposal to its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs.
A composition is an agreement under which creditors agree to accept a certain sum of money in settlement of the debts due to them.
The procedure is extremely flexible and the form which the voluntary arrangement takes will depend on the terms of the proposal agreed by the creditors. For example, a Company Voluntary Arrangement may involve delayed or reduced payments of debt, capital restructuring or an orderly disposal of assets, with a key purpose being to free up cash to enable some repayment of overdue debts to begin.
This may require the disposal or redistribution of assets. A Company Voluntary Arrangement may be used as a stand-alone procedure or as an exit route from an administration (see our Administration page). It may also be used where a company is in liquidation, but this is extremely rare. The proposal will be made by the directors, the administrator or the liquidator, depending on the circumstances.
The proposed arrangement requires the approval of at least 75% in value of the creditors, and once approved is legally binding on the company and all its creditors, whether or not they voted in favour of it. There is limited involvement by the court, and the scheme is under the control of an insolvency practitioner acting as a supervisor.
Typically a Company Voluntary Arrangement will last 2-4 years and includes an element of debt relief.
The Company Voluntary Arrangement was introduced by the 1986 Insolvency Act.