A Company Voluntary Arrangement (CVA) is a formal agreement between a company and its’ non-secured creditors to offer them a better outcome than they would receive if the company were forced into an alternative insolvency process, administration or more typically, liquidation.
It usually involves allowing a company to continue to trade following a period of restructuring in order to realise certain assets and/or pay profits into a CVA fund over time, which is then used to repay creditors in part or full.
Some of the key advantages of a CVA include:
- It can result in the rescue of both the company and the business within it
- It can protect the goodwill value of the company’s business
- Directors remain in control
- Jobs are preserved
- Creditors get a better return
- Trading relationships can continue
- It avoids formal insolvency (i.e. administration or liquidation) and therefore there is no formal investigation into the conduct of the directors