Cork Gully has prepared a series of guidance notes which are designed to provide an overview of the purpose and processes involved in a Company Voluntary Arrangement, an Administration and a Scheme of Arrangement.
Company Voluntary Arrangement Guidance Notes
A CVA is a formal procedure which enables a company to compromise its liabilities to creditors, subject to an affirmative vote of 75 per cent by value of creditors voting on the proposal, with the principal aim of rescuing the company as a going concern. The procedure is introduced by Part 1 of the Insolvency Act 1986 and is deemed to be a simple alternative to a Companies Act Scheme of Arrangement. The process typically involves directors presenting a proposal to the Court, with the help of a qualified insolvency practitioner, and if the creditors accept the terms of the proposal the insolvency practitioner would supervise the arrangement and pay the creditors in accordance with the accepted proposals.
Administration Guidance Notes
There is one overarching purpose, which is divided into 3 objectives. These objectives are
- Company rescue (as a going concern) is primary.
- If that is not possible (or if the second objective would clearly be better for the creditors as a whole), then the administrator should try to achieve a better result for the creditors than would be obtained through an immediate winding-up of the company, possibly by trading on for a while and selling the business(es) as a going concern.
- Only if neither of these objectives is possible should the administrator realise property to make a distribution to secured and/or preferential creditors.
Scheme of Arrangement Guidance Notes
A Scheme is a compromise or arrangement between a company and its creditors (or any class of them) and/or its members (or any class of them). While a Scheme can be used for company takeovers, this is not considered in this guide, which focuses on the application of Schemes for insolvent entities. A Scheme is not an insolvency procedure carried out under the Insolvency Act, but is carried out under Part 26 of the Companies Act. A company successfully fulfilling its obligations under an approved Scheme, and restructuring its debt obligations, by either compromise or arrangement, can continue as a solvent entity.