Company Voluntary Arrangement (CVA)
A CVA is a legally binding arrangement between a company and its creditors for some or all of its debts to be repaid from future profits over a period of time. This is usually a better prospect than to see the company enter terminal insolvency and every creditor losing their money. If a company has a viable future, but current cash flow problems have resulted in mounting pressure, a CVA may be a good solution.
Administration Orders were introduced as a means for the protection of companies from creditor action while a restructuring is carried out.
This technique can be very powerful where the company has a very aggressive creditor or creditors and needs to protect itself from them whilst a rescue plan can be worked out. A company in administration may continue to trade (under the control of an Administrator) whilst a strategy is devised.
If a company is insolvent and does not have enough money to pay all of its debts, sometimes the only appropriate course of action is for the company to be placed into liquidation. A Creditors Voluntary Liquidation is the most common way for directors and shareholders to deal voluntarily with their company’s insolvency.