What happens at a Company Voluntary Arrangement (CVA) creditors meeting?
Part of the process of applying for a Company Voluntary Arrangement (CVA) involves holding a creditors meeting. There, the company’s creditors vote to either approve or reject the proposal for a CVA. The creditors must be satisfied that the CVA will provide them with a better return than if the company went into administration or liquidation.
More information about a Company Voluntary Arrangement
Before the creditors meeting
The insolvent company will have contacted a licensed insolvency practitioner (IP) and applied for a CVA to rescue the company and allow it to continue trading.
The insolvency practitioner negotiates a proposal
The IP’s role starts when the directors first seek advice on their current position. Once the company decides to apply for the agreement, they will provide the IP with the company’s financial details, and of any debts or obligations. The IP will help the company put together a proposal based on the information provided.
More details about an IP’s role
The CVA is proposed to the creditors
Once the company directors have approved the CVA proposal, it will be sent out to all creditors, who are invited to the creditors meeting. The meeting is most commonly held ‘virtually’ following recent changes to legislation.
There will be a minimum period of 14 days’ notice for the meeting in which creditors can decide to reject or approve the CVA.
Creditors meeting takes place
The creditors meeting is chaired by the IP, giving at least 14 days notice (plus time to give allowances for postage). The meeting provides creditors with an opportunity to ask any questions regarding the proposal.
Creditors are not required to attend the meeting in person, and in reality, few do. Instead, they’ll send their vote via proxy before the meeting via email or may attend via video call. The IP may request that at least one company director attends the meeting.
Any party that the company owes money to is considered a creditor and will be entitled to a vote on the proposal. Employees are only entitled to a vote if the company owes them expenses, wages or awards from employment tribunals.
Creditors may request modifications
Creditors may be happy to accept the agreement, but with modifications to the proposals. Unless these modifications are accepted, their vote won’t count in favour. The IP can negotiate with creditors to make sure the modifications are workable.
The CVA is approved or rejected
At the end of the meeting, the creditors will vote on the agreement.
Afterwards, a second vote is cast discounting any claims received from creditors connected to the company (such as directors). This second vote requires 50% of creditors (by the value of the debt) not to reject the proposal for it to be approved.
If the agreement is approved, the IP can action it. If the creditors reject the CVA, the company may have to go into either administration or voluntary liquidation, which is generally preferable to compulsory liquidation; induced by a creditor filing a winding-up petition.
What can happen if your creditors reject a CVA
In summary
Once a licensed insolvency practitioner has assisted the directors in completing a proposal for a CVA, the company’s creditors will vote on it at a series of meetings. Creditors aren’t required to attend the meeting but can send their vote via proxy. Creditors may insist on modifications to the arrangement to protect their interests, and for the proposal to be approved, creditors owed at least 75% by the value of debt must agree to it. If the CVA passes, the IP can action the agreement. If the creditors reject the CVA, the company will have to consider other options.
How we can help
If you’re concerned your company is becoming insolvent, or creditor pressure is increasing, you should contact us as soon as possible. Our licensed insolvency practitioners can advise you whether a CVA would be appropriate for your circumstances. Our advice is free and impartial with no obligation.
Case Studies
Designer Recliners Limited
Kelly Burton • Manufacturing • Administration, Company Voluntary Arrangement (CVA)
A Sheffield furniture manufacturer and upholster has relaunched offering a smaller, more specialised range of products.
Anico Interiors Limited, which included reclining chairs for the elderly, had suffered cash flow problems and issues with profitability.
Designer Recliners Limited, managed by director Nick Wall, has purchased the assets and business of Anico saving all 11 jobs.
Andy Wood and Robert Dymond from Sheffield business turnaround experts Wilson Field were appointed joint liquidators on 8 June and advised on the sale of the 14-year-old company, based on Orgreave Crescent at Orgreave Industrial Estate, as a going concern.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“Historically, the company offered a wide range of products but has now streamlined its offer to customers and cut out some unprofitable lines, as well as re-vamped its web site.
“Directors took advice from Wilson Field with the business sold to new company Designer Recliners Limited as a going concern, safeguarding all 11 employees’ jobs. The new company will offer the same service and standards under the same management team but focus on a smaller range of specialised products.”
The company employs skilled staff including upholsterers, seamstresses and cutters and was set up in 2002 by Nick Wall.
Silcox Coach Company
Kelly Burton • Automotive • Company Voluntary Arrangement (CVA)
Pembrokeshire-based Silcox Coach Company, which operates school transport as well as local bus services, has been placed into administration today.
Despite attempts by administrators from Sheffield-based Wilson Field to secure a buyer with various interested parties, the 134-year-old company, which operated a fleet of 65 coaches and buses from its base in Pembroke Dock, has now ceased trading.
Insolvency practitioners Kelly Burton and Joanne Wright from Wilson Field Limited were appointed by shareholders after the company experienced financial difficulties and as a result all 92 staff jobs have been made redundant.
However, in the region of 50 staff have been re-employed by Edwards Coaches of Pontypridd who have been granted the local authority contracts previously operated by Silcox.
Kelly Burton, director and insolvency practitioner at Wilson Field said:
“Silcox Coaches was a fourth generation bus and coach operator and over the years provided various forms of transport services latterly focussing local authority community bus routes, school services, coach hire and coaching holidays.
“The company had an excellent reputation within the industry, the local community and its clients. Initially there were a number of parties interested in buying the business and assets and we had hoped to save all the jobs of the loyal workforce. Sadly, despite our best efforts none of these came to fruition. On the positive side, Edwards Coaches of Pontypridd have re-employed approximately 50 of those staff.”
As well as office accommodation in Pembroke Dock, Silcox also occupied a small travel office in Tenby and a large bus and coach compound near the offices in Pembroke Dock.
Edwards Coaches is the largest family owned coach company in Wales employing over 500 staff and operating 260 vehicles. It currently operates National Express coaches from Haverfordwest departing daily to Cardiff, Heathrow, Gatwick London and various other destinations plus transportation for over 8000 students to school or college each day from bus depots all over South Wales.
It also operates coach holidays for 80,000 passengers a year across the UK and Europe and operates The Edwards’ Red Dragon coach which is the official carrier of the Wales Rugby Team.
Travellers who have booked and pre-paid for a holiday with Silcox may be entitled to a refund and should contact either Bonded Coach Holidays (BCH) e-mail: bch@cpt-uk.org or The Confederation of Passenger Holidays UK (CPT) Tel: 020 7240 3131.
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