Company Voluntary Arrangement

Section 1 of the Insolvency Act 1986 sets out who may put forward a CVA and what it involves: the directors of a company 'may make a proposal under this Part to the company and to its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs (from here on referred to, in either case, as a “voluntary arrangement”).' The proposal must nominate a supervising professional: 'A proposal under this Part is one which provides for some person (“the nominee”) to act in relation to the voluntary arrangement either as trustee or otherwise for the purpose of supervising its implementation; and the nominee must be a person who is qualified to act as an insolvency practitioner.'

Once a proposal is put to creditors, it does not need unanimous support to bind everyone. The Insolvency (England and Wales) Rules 2016 set the voting threshold: 'In the case of a proposed CVA a decision approving a proposal or a modification is made when three-quarters or more (in value) of those responding vote in favour of it.' There is a second safeguard protecting creditors who are not connected to the company: 'In a proposed CVA a decision is not made if more than half of the total value of the unconnected creditors vote against it.' A CVA approved on this basis binds every creditor who was entitled to vote, whether or not they actually did so, allowing the company to continue trading under the agreed arrangement rather than being wound up.