Corporate insolvency for dispute resolution practitioners: company voluntary arrangements
Corporate insolvency for dispute resolution practitioners: company voluntary arrangements

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Corporate insolvency for dispute resolution practitioners: company voluntary arrangements
  • Note
  • What is a CVA?
  • The effect of a CVA on legal proceedings
  • How does a company enter into a CVA?
  • Role of nominee and supervisor
  • How to challenge a CVA
  • How a CVA might fail and what happens next

This Practice Note refers to the Insolvency Act 1986 as IA 1986.

Note

This guide is a summary of company voluntary arrangements (CVAs) and their impact on legal proceedings from a dispute resolution perspective (for full details, see: Company Voluntary Arrangements—overview).

What is a CVA?

A CVA is a contractual agreement between a company and its creditors and is the corporate equivalent of an individual voluntary arrangement (IVA) for individuals. The company need not be insolvent to propose a CVA. The main benefits of a CVA include:

  1. there is no need to prove insolvency, so action can be taken early at the first signs of financial distress

  2. if the CVA is approved by the requisite majority (75% in value of creditors present in person or by proxy and voting on the proposal and not opposed by more than 50% of independent creditors ie those who are not associates) it can be imposed on unsecured dissenting creditors, which is a process known as cramdown (see Practice Note: The CVA proposal and procedure—the position under the Insolvency (England and Wales) Rules 2016)

  3. the CVA proposal will bind creditors who are unaware of the CVA proposal/creditors' decision making procedure

The main limitation, however, is the lack of any automatic moratorium (few companies qualify as small companies for the moratorium) and although the Insolvency