CVA – How to apply for a company voluntary arrangement

If the directors of a business propose a company voluntary arrangement, they need to appoint an Insolvency Practitioner to supervise the implementation of the arrangement. At this point the Insolvency Practitioner’s role is called “the nominee”.

The nominee must establish that the company is proposing a viable arrangement

If it is viable, the nominee must report to the court within 28 days of being appointed to state that a meeting of the creditors is being held.

Proposed payment plans can allocate payments for up to a five year period. The payment period may be shorter than five years, but not longer than five years.

The creditors meeting

During the meeting, the Insolvency Practitioner’s role is called “the mediator” as they try to balance the rights and duties of the company with those of its creditors.

During the meeting, the credit ors decide whether or not to approve the arrangement, which may be approved with or without modifications.

Creditors vote on whether a company voluntary arrangement is to be considered. If a majority (in excess of three-quarters in value of the debt) of creditors accept the proposal, all creditors who had notice of the meeting are bound by the arrangement.

The creditors do not have to approve the corporate voluntary arrangement.

Once the arrangement has been approved, the Insolvency Practitioner’s role is called “the supervisor” as they supervise the arrangement.

The supervisor must send a copy of the chairman’s report of the company and credi tors meeting to Companies House.

Every 12 months, the supervisor must send an account of receipts and payments, toge ther with a progress report, to all creditors and the Registrar of Companies House.

When the arrangement is completed, the supervisor must notify the Registrar within 28 days after final completion.

The supervisor must also notify the Registrar if the arrangement has failed, for example, if the company miss a creditor payment..

Moratorium

Some small companies qualify for a moratorium when the company voluntary arrangement is first proposed. The moratorium prevents creditors taking any further action while the directors to put their company voluntary arrangement proposal together.

To quality for a moratorium, your company must fulfil two of the following conditions:

• Have a turnover less than £5.6 million
• Have a balance sheet total less than £2.8 million
• Having fewer than 50 employees

More information

• CVA – What is a company voluntary arrangement?
• CVA – The company voluntary arrangement process
• CVA – Who needs a company voluntary arrangement?
• CVA – When to apply for a company voluntary arrangement
• CVA – The advantages of company voluntary arrangements
• CVA – The disadvantages of company voluntary arrangements
• CVA – Insolvency and company voluntary arrangements