JJB Sports owners are ‘delighted’ to have concluded their company voluntary arrangement (CVA) last month.
The sports equipment retailer entered into a CVA with creditors and shareholders in May 2009 to avoid collapse.
But what is a CVA?
Companies apply for CVAs when they’re overwhelmed by debt liability and, as a result, unable to trade.
The arrangement involves the company asking its creditors’ to write off usually up to 50pc of the outstanding debt. The remaining 50pc is usually paid in instalments over four to five years.
An application can be made before or after a winding up petition, but this would make it very difficult for the business to get credit, subsequently, a CVA should be used as a last resort.
Often, repayments do not begin for up to 12 months, during which time the company may be obliged to make additional payments to the insolvency practitioner (if they’ve chosen to use one).
Before a CVA proposal is approved, creditors representing at least 75pc of the debt value must vote in favour of the CVA at a convened meeting of creditors.
Companies that end up in liquidation usually leave creditors with nothing so – even though there’s no guarantee they’ll get their money back – most creditors will vote for a CVA with the expectant hope of getting some money recovered.
During the waiting period, the company may still go into liquidation, and most CVAs do fail.
So what are your options as a creditor who has a customer that is proposing a CVA?
Contact Insolvency & Law immediately on 020 7504 1300 for your free and confidential advice and find out how we can help you. You only have a limited time where we can help you so act now.