If a company has a viable, profitable business but has been unable to manage its cash flow by agreement with its creditors, then it may be necessary to ask the creditors to vote on a proposal for a plan for the company to continue on the basis that it will provide a better return to creditors than if the company were put into liquidation.
If the Company Voluntary Arrangement (CVA) proposal is approved, the current debts are frozen and the plan is administered by the Supervisor of the CVA. The CVA is a legally binding contract between the company and its creditors and therefore it is a useful process where a minority of creditors would otherwise not go along with a rescue plan.
The CVA can also be an opportunity to bring in new capital, change the shareholders, introduce new skills, and reduce overheads or to revise operational efficiency. The key to a successful CVA is to plan creatively and realistically and that requires a truly collaborative approach to find the right solution.