Company Voluntary Arrangement (CVA)- FAQ’s

Who can propose a Company Voluntary Arrangement (CVA)?

In most cases the company directors will initiate CVA proceedings but the liquidator or administrator can also promote a CVA on behalf of the company.

What are the costs?

RNF Business Advisory Limited will initially review your case free of charge, every case is different and therefore we need to understand your circumstances before providing appropriate advice. It is only when you are happy with our advice we will look at your specific needs and the complexity of the case before outlining and agreeing our fees.

As a director what information do I need to provide to RNF Business Advisory Limited?

We will need various information about the company including, trading history, financial accounts, cash flow forecasts, and the reasons behind the company’s current situation. It is important as a director you ensure all information is made available to us and is accurate, such as any previous legal proceedings or financial difficulties the company has experienced.

What needs to be considered for a CVA?

For a CVA to be considered an appropriate solution there are several aspects to consider:

• Is the company able to regain profitability and increase turnover?
• Can underlying problems be solved and current difficulties overcome?
• Has the business received new capital investments and whether future capital injections are to be expected?
• Can the employees adapt to the situation and implement essential changes to secure the business in the future?
• Is the proposed CVA financially viable for the company considering future liabilities?

What is the majority vote at the meeting?

The meeting decides whether to approve the voluntary arrangement through a majority vote. If 75% of the unsecured creditors agree to the proposal, it is then binding on all creditors who had notice of the meeting and were entitled to vote. If the meeting of creditors and shareholders approves a voluntary arrangement, the nominee(or other insolvency practitioner), becomes the supervisor of the arrangement and is responsible to monitor the compliance during the terms of the CVA.

Will the bank be involved in the CVA?

In the event that the bank is a secured creditor they will not be bound by the terms of the CVA. However it is important you build a good relationship with any secure creditors and gain support through any financial difficulty the company is experiencing.

Can the CVA be adapted if circumstances within the company change?

A variation to the terms of the CVA must be agreed by creditors with a 75% majority vote. Any variation should be presented at a meeting of creditors where they will decide if the amendments are agreeable and the terms of the CVA should be changed going forward.

Can the company continue to trade whilst the CVA is proposal is being considered?

It is in the best interests of the company and the creditors if the company can continue to trade.

How will this affect employees?

Changes will need to be made to the business to increase and sustain profitability. Management will need to discuss these changes with employees ensuring the necessary improvements are made. Employees may be affected in various ways such as redundancy or role changes, it is important to inform them as early as possible and implement the changes quickly.

Will Personal Guarantees still stand if the CVA is proposed?

Yes all personal guarantees will be in effect until all outstanding debt has been paid and the account is cleared.