ABSTRACT

Company voluntary arrangements (CVAs) were introduced in 1986 to enable companies to enter into a binding arrangement with their creditors as to how their debts would be paid, or partly paid, and over what timescale. This was intended to be a company – rather than a business – rescue procedure, to give some breathing space to restructure and continue to trade back to financial health. However, in practice the CVA procedure has been little used, with about 10 CVAs in comparison to 1,000 creditors’ voluntary liquidations each month. There are a number of reasons why the ‘old’ procedure was unpopular, but the lack of a moratorium period to give protection from a creditor enforcement action in the lead up to the creditors’ meeting was often given as the main reason, though, as you will see, this is not always the case. So new provisions dealing with a CVA with a moratorium came into force on 1 January 2003.