9c Company Voluntary Arrangements

Question 1

What is a company voluntary arrangement?

Answer 1

A CVA allows a corporation to enter into an arrangement with its creditors to pay a set proportion of its debts over a period of time.

Question 2

What is the first step in the procedure of a CVA?

Answer 2

• Either the company, administrator or liquidator appoint a nominee who should be an insolvency practitioner who should consider whether a CVA is the most reasonable approach to take considering the company and its creditors.

Question 3

What are steps 2&3 in the procedure of a CVA?

Answer 3

• Proposal is written up and filed at the court and should be distributed to the creditors.
• Approval is needed by the creditors (usually by the deemed consent method) to enter and once obtained is legally binding. This must be communicated to the court.

Question 4

What is the last step in procedure of a CVA?

Answer 4

If a creditor is entitled to a vote, they can challenge the CVA in court under the following conditions:
- Unfair prejudice (rights negatively affected in comparison to other creditors).
- Material irregularity (serious issue in conduct of approval of CVA).

Question 5

What happens if an appeal to challenge an approved CVA is successful?

Answer 5

Court can end or suspend the CVA or order that further steps are required to gain approval.

Question 6

What is a moratorium re a CVA?

Answer 6

Period of ‘breathing space’ that can be applied for by directors while preparing a CVA proposal.

Question 7

How does a company apply for a CVA?

Answer 7

Submit the following to the court.
- Proposed CVA
- Statement of the company’s affairs
- Confirmation from nominee that CVA is a reasonable prospect.

Question 8

What must a company do if a moratorium period is granted?

Answer 8

State this on all business documents and notify the registrar.

Question 9

What are the consequences of the moratorium?

Answer 9

• No insolvency proceedings may be commended.
• No security can be enforced.
• Any winding up proceedings prior to moratorium must be halted.
• Company must obtain consent of the nominee to hold meetings.
• Company can only sell property with permission from nominee or creditors committee.
• Nominee must monitor company affairs.