The need for company voluntary arrangement
If a business is in financial turmoil, unable to pay its debts and looking at imminent closure, then a company voluntary arrangement (CVA) is intended for such an entity. There are several features to help the business get a chance to turn around and thrive once again, which include an agreement by creditors to accept settlement of their debt, usually payable over a period of five years.
Secondly, company voluntary agreement also involves writing off part of the debt after a lapse of the five year period. With this agreement, all court actions including petition to wind up are stopped and no additional payment of interest can be included to the debt. As such, the company can have a chance to get back on its feet again.
These are some features of a company voluntary arrangement, which forms an alternative to dissolution or closure of a company threatened by debt.
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