15.9 Company voluntary arrangements

15.9 COMPANY VOLUNTARY ARRANGEMENTS

A Company Voluntary Arrangement (CVA) is a legally binding agreement between a financially distressed company and its creditors. It allows the company to reach a compromise or arrangement to repay its debts over a specified period of time.

1, Initiation

Proposal: The company, its directors, or a licensed insolvency practitioner can propose a CVA to the company’s creditors. The proposal outlines the terms of the arrangement, including how the company will repay its debts.

Nominee’s report: A licensed insolvency practitioner is appointed as a nominee to review the proposed CVA and prepare a report. The nominee assesses the viability of the arrangement and provides an independent opinion on its likelihood of success.

2. Approval Process:

Creditors’ meeting: A meeting of the company’s creditors is held to vote on the proposed CVA. The creditors may include secured creditors, unsecured creditors, and shareholders. For the CVA to be approved, it requires a majority vote from the creditors in terms of value.

Approval threshold: The CVA must be approved by at least 75% in value of the voting creditors present (in person or by proxy) at the meeting.

3. Implementation and supervision:

Supervisor appointment: If the CVA is approved, a supervisor is appointed to oversee and implement the terms of the arrangement. The supervisor is typically an insolvency practitioner.

CVA terms: The CVA sets out the agreed-upon terms, which may include reduced debt repayments, extended repayment periods, changes to interest rates, or other modifications to the company’s obligations.

Repayment plan: The company makes regular payments to the supervisor as per the agreed-upon repayment plan. The supervisor then distributes these payments to the creditors in accordance with the terms of the CVA.

CVA is a complex process that must comply with the relevant laws and regulations of the jurisdiction in which the company is incorporated.