The process begins when the company directors decide that a CVA is the right insolvency process for the company to pursue.
A licensed insolvency practitioner will oversee the formulation of the company’s proposals examining areas such as the company’s cash flow, viability and profitability going forward.
The Insolvency Practitioner, directors of the company and creditors will attend a meeting to review the terms of the proposals presented and vote on acceptance, with or without modifications.
The proposals will require the approval of 75% of those creditors present in person or by proxy 50% of company shareholders to be approved.
Once approved the proposals are legally binding on all creditors who received notice. A timeframe for repayment is set within the terms of the proposals, enabling the company to continue to trade.
The directors will remain in control of the business while the CVA is in place as long as there is no breach in the terms of the CVA. Any breach of the agreement can result in insolvency procedures being commenced to place the company into liquidation with a resultant cessation of trading.