Apart from the obvious advantages, the other main benefits of a CVA are:
To consider a CVA, the company will have to demonstrate that it has a realistic prospect of making profit or raise additional investments to repay what is proposed to creditors.
Directors will need to instruct a Licenced Insolvency Practitioner to assist with writing a Proposal. It is this Proposal that will be sent to the company’s shareholders and creditors to consider at a meeting. The Proposal will require at least 50% of the shareholders and 75% or more of the creditors (who vote) to agree to the Arrangement.
Once approved, all creditors, whether they voted for, against, or not at all, are bound by the terms of the Arrangement. The company must ensure that the terms of the Arrangement are adhered to. If contributions are subsequently missed or terms breached, the Arrangement may fail and the Supervisor may be asked to petition to the wind up the company.