Although the process has similarities, it is different from the administration. A company would go to the administration if it was officially insolvent, but remained viable. CVAs are usually done before the date of bankruptcy in order to prevent this situation from being reached. The applicant must communicate to any shareholder, and to any creditor of the company whose claim and address is the nominee, as well as the following documents: The procedure for implementing a CVA is defined in Part I of the Insolvency Act 1986 (the Law) and Insolvency (England and Wales) rules 2016 (the rules). A CVA is implemented under the control of a judicial administrator, but the existing management is maintained throughout the life of the CVA. From a technical point of view, there is no legal obligation that the company offering a CVA be in default or not be able to repay its debts, but in practice, a CVA is used in case of risk of insolvency. The content of the CVA proposal is legally obligated to comply with the guidelines of the 1986 Insolvency Regulation – Rule 1.3. A typical CVA contains basic information about the insolvent company and the designated candidate, who must be a certified judicial administrator (i.e. names, addresses and contact information). There will be a detailed introduction to the company`s business, including information about employees, profits and major transactions or events. The liquidator you appoint works with your company`s directors to make this section as accurate and detailed as possible. After the introduction will be the main proposals, followed by information on the creditors and the company`s debts. Remember that you must be prepared to provide documents and facts about your business while writing the CVA.
A CVA is a process that could allow your business: in most cases, directors continue to manage the business as usual during a voluntary company agreement. When your company enters the administration, the administrator may propose a CVA during the process to reverse the trend. Similarly, a liquidator may propose a CVA if it is assumed that the agreement would be more advantageous to creditors than liquidating the company`s assets. Similarly, a company can be put into liquidation in a CVA. In rare cases, corporate creditors may, as part of the CVA process, push for a change of direction to protect their own interests. A CVA avoids the liquidation of companies and therefore does not require an investigation into the behaviour of the directors who led to the insolvency. Accusations of illicit trafficking or bad practice are avoided and managers can focus on transforming the business. A voluntary agreement from the company may be offered at any time until a liquidation order is issued to your company. If you`ve already received a resolution petition or if your creditors are threatening to create one, then you still have time to set up a CVA and save your business if you act quickly! As soon as the liquidation decision is made, forced liquidation begins and, at this stage, the possibility of facilitating recovery by all means is unlikely. SIP 3.2 (Statement if Insolvency Practice) makes it clear that judicial administrators should ensure that the interests of the company seeking the CVA and its creditors are balanced. A limited liability company or company (LLP) may apply if the directors or members consent. A voluntary agreement is a legal agreement between an insolvent limited company and its creditors.