What a CVA is
A company voluntary arrangement is a binding agreement between a company and its unsecured creditors to pay back part or all of its debts over time, usually from future profits, while the company keeps trading. A licensed insolvency practitioner supervises it.
How creditors decide
The directors propose the terms. Creditors vote, and the CVA is approved if creditors holding at least 75% by value of the debts that vote are in favour, and it is not opposed by more than half of the unconnected creditors. Once approved it binds every unsecured creditor who was entitled to vote, including those who voted against it.
What it changes for suppliers and landlords
- Old debts are paid only on the terms of the arrangement, often a fraction of the amount.
- Landlords are often asked to accept lower rent, which is why retail and restaurant chains use CVAs.
- New supplies are paid normally, so it is your decision whether to keep trading and on what credit terms.
- If the company misses its CVA payments, the arrangement usually fails and the company moves into liquidation.