How are Employees Affected by a CVA?

A Company Voluntary Arrangement can be good or bad for employees depending on the circumstances a company finds itself in. The ultimate aim of a CVA is usually to enable it to continue trading without the pressure of creditors’ demands for debts to be settled.

In most cases a CVA will preserve jobs for the future and prevent redundancies. The company can continue to run as it did prior to the CVA with contracts of employment remaining unchanged.

Sometimes the CVA process may be the start of company restructuring with significant changes to the way a business operates. In this scenario redundancies can be inevitable. There is often a stark choice between what is good for the long term health of the company and employees which result in jobs being cut

As part of the CVA process, the directors of a company must present a clear plan of how they are going to improve the fortunes of the company and convince the majority of creditors that they can do so. A company that plans to make staff redundant must ensure that HR departments are familiar with employment law to prevent costly legal claims if employees are deemed to have been treated unfairly.

If you own a company that is facing insolvency and/or changes to the way it operates, then it is important to speak to an advisor on the most appropriate course of action to minimise the impact to staff.