Company Voluntary Arrangement

This is a legally binding agreement between a company and its creditors. It is a procedure where debt reorganisation takes place usually involving reduced payments of debt, but may involve a delayed payment of debt or capital restructuring on the orderly disposal of assets. It is proposed to creditors and shareholders at separate meetings. This agreement reorganises the debts of a company, to make reduced payments towards the total amount of company debt. Only a percentage of the debt is paid to creditors.

There is a limited involvement by the Court and the scheme is under the control of the Licensed Insolvency Practitioner acting as a supervisor. It is important to realise that the Insolvency Practitioner is a supervisor to the scheme, not of the company. The Company remains under the control of its management and directors. The CVA procedure was designed primarily as a mechanism for business rescue.

Sinclair Harris has completed a number of successful CVA’s.

Actual Case 1

We acted for a perfume manufacturer who was very successful in his early years and invested a seven-figure sum in the bond to repay the Corporation Tax the following year. The bond heavily underperformed and most of the investment was lost. The company entered into a Voluntary Arrangement with its creditors whereby the creditors accepted a much reduced figure in full and final settlement of the company’s liability.

Actual Case 2

We acted for a chain of retailers who had suffered due to fashion changes in their area of specialisation. The directors had not recognised that demand for their main products had reduced. Sinclair Harris recommended and assisted the company entering into a Company Voluntary Arrangement whereby creditors received a proportion of their debts over a period of five years, leaving the directors of the company time to instigate the other changes to recover their business.

Actual Case 3

We acted for a chain of restaurants that had over traded and faced threat of a Winding Up Petition from their creditors. We successfully assisted the Director of the company in drafting a Proposal that was accepted by creditors. We are pleased that the Company Voluntary Arrangement Proposal was successfully completed and the restaurant is now trading very successfully.

Actual Case 4

We acted for a manufacturer of sophisticated electronics systems. The company suffered due to a bad debt and by re-investing substantial funds into the company’s growth rather than leaving the money available to pay debts as and when they fell due.

Sinclair Harris communicated with a number of creditors and was successful in assisting the company in entering into a CVA with its creditors that was ultimately successful.