A CVA is effectively a contract between the Company and its creditors and shareholders. The CVA has the effect of ring-fencing the Company's historic liabilities whilst allowing it to either continue to trade, whilst paying a proportion of its future profits to the creditors, or to conduct an orderly realisation of its assets.
For a CVA to be approved 75% in value of the voting creditors must vote in favour of the arrangement. In addition, 50% of shareholders must also be supportive.
Advantages of a CVA can include: