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What actually happens?

What actually happens?

Directors put CVA repayment proposals to creditors.
If creditors accept the proposals the company sells some or all of its assets or continues to trade paying money into the CVA for dividends.
Company sticks to the terms and rides out the CVA, sailing off into the sunset…

We help to put the CVA proposals together which includes a company history, a financial snap shot of its current position and some forecasts. Hopefully that will show that the business has a future and that it is better if it carries on.

We then produce a report to the court stating whether we believe the CVA is a good idea (or not) and is a viable alternative to liquidation.

We then help the company call the necessary meetings of creditors and shareholders to vote on the acceptance or rejection of the CVA.

If the CVA proposals are accepted by 75% in value of the creditors that vote then it is approved.

Those that do not bother to vote are still legally bound by it and are locked in. Quite often a ‘horse trade’ follows where the offer to creditors is renegotiated with key creditors before it is finally approved.

There is a time limit of up to 14 days after the first meeting to do that.

The type of creditors bound by it include HM Revenue and Customs for tax, VAT and PAYE, trade suppliers, unsecured bank debts, council business rates and employee claims (even from a tribunal).

Directors are often surprised that all these debts can in fact be legally frozen and the interest and penalties stopped.

David Kirk ACA FABRP

David Kirk

David Kirk is a Chartered Accountant and Licensed Insolvency Practitioner.
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