Fraser Frayne Insolvency Practitioners Limited
Old Canal Cottage
Bath BA2 8BS
Tel: 01761 437754
The CVA procedure, introduced with the Insolvency Act 1986, is a flexible procedure for insolvent companies, and can be a useful alternative to liquidation.
An insolvent Company will put a written proposal to its creditors and shareholders for them to consider with a Licensed Insolvency Practitioner as the office holder, firstly as Nominee and then as Supervisor, to run the Arrangement if creditors approve it.
The detail of what happens:
The insolvent company formulates proposals to its creditors, (usually the Insolvency Practitioner (IP) helps with this) and appoints the IP as Nominee. The proposal sets out the Company’s history, its assets and liabilities, its actual and projected profitability, and the manner in which it is proposed to deal with creditors.
It is possible to obtain an order from the Court to protect the company whilst the proposals are being written. The Nominee files a report in Court on the proposal saying whether in his opinion meetings of shareholders and creditors should be called to consider and vote on the proposals. The Nominee then sends the proposals to shareholders and creditors and invites them to separate meetings.
The shareholders and creditors can accept or reject the proposals, or negotiate amendments (called modifications) with the Board of Directors on behalf of the Company. If the Company can persuade the creditors and shareholders that the CVA is a better option than other outcomes such as liquidation, court judgements and asset seizure, then the CVA is accepted.
Formally, for the proposed CVA to be accepted, over 75% of voting creditors by value must vote in favour. If so, then the Nominee is normally appointed Supervisor of the CVA, and works to ensure that the terms of the CVA are complied with, to distribute funds to creditors, and to report periodically on the CVA’s progress.
Once the CVA reaches its end, the Supervisor will, if the CVA terms have been complied with, declare the Arrangement a success.
This outline is general and may not apply to a specific company’s circumstances for which a CVA may not be appropriate. The outline, views and suggestions set out are not intended to constitute professional advice, nor to be a substitute for specific advice.
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Registered in England Co. No. 6934426 VAT No. 972 6786 64
Registered Office: Old Canal Cottage Dunkerton Bath N E Somerset BA2 8BS
Company Secretary: Jan Bartoszewski; Directors: Matthew Frayne BA, FIPA, FABRP; Fraser Frayne-Watt
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