In March BHS entered into a Company Voluntary Arrangement (CVA), an insolvency procedure designed to ensure the long-term viability of a business through a re-structuring of its liabilities to creditors. However less than 5 weeks later the company has entered into Administration and its prospects look bleak, with over £1.3bn in debts including a pension deficit of £571million.
Such a high-profile case has no doubt caused some observers to question the benefit or validity of CVAs. However the BHS case is a very complex one and, for your more typical client, CVAs remain an important insolvency procedure, when used in the right circumstances. If a business has a viable future but is hampered by legacy debts, then a CVA is often the best way of ensuring that the company can continue to trade, through a formal restructuring of its unsecured debts.
So here is a basic guide to the CVA, which we hope you will find useful.