Company voluntary agreements Flashcards
(11 cards)
explain a CVA and which creditors’ rights it does not affect
a binding contractual agreement between a company + its creditors, exceptions:
o Does not inc. secured creditors unless they agree (cannot vote on CVA)
o Preferential creditors take priority unless they agree otherwise (can vote on CVA)
does the company need to be insolvent?
The company need not be insolvent, but can be used in administration/liquidation
what are the pros and cons?
❌ No automatic moratorium (but could apply for free standing moratorium for breathing space)
✔️ cheaper than administration + creditors more likely to get money than on liquidation
what are the main stages of the CVA process? (4)
- initial proposals
- approval by creditors and SHs
- implementation of the CVA
- completion of the CVA
what happens within the ‘initial proposals’ stage? (3)
- Ds (or, if in administration/liquidation, the A/L) draft CVA proposals
- Proposals + statement of company’s affairs submitted to nominee (a qualified insolvency practitioner) for review
- Nominee has 28 days to confirm to the court whether they should be put to the company’s creditors and SHs (if proposed by A/L the nominee does not need to report to court)
how is the creditors’ decision made and what are the approval requirements?
decision procedure used. Usually virtual meeting. Creditors can demand a physical meeting.
Approved if at least 75% of the creditors in value (i.e. amount owed) agree, unless those voting against it inc. more than 50% (in value) of unconnected creditors
if £100k is owed, £40k of which to connected creditors and the remaining £60k to unconnected creditors, what are the approval requirements? when would the decision fail?
Total approval needed: 75%
BUT: If more than 50% of unconnected creditors by value (i.e. over £30k) vote against, the proposal is rejected — even if total approval exceeds 75%.
how and when does the SH meeting take place?
What effect does the decision have?
physical meeting which takes place 5 business days after the creditors’ decision has been made. So long as the creditors have approved, the CVA goes ahead even if SHs don’t approve.
what happens once the CVA is approved?
the nominee becomes the supervisor and oversees its implementation
the supervisor informs the court of its approval
Creditors can challenge approval within 28 days of the report to court.
who is bound by the CVA?
all unsecured creditors (inc. those unknown or who didn’t vote)
secured creditors are only bound if they agreed
what must the supervisor do once the CVA is completed?
Supervisor sends a final report to SHs and creditors on the CVA’s implementation within 28 days of completion
