The company would have to provide a Statement of Affairs that would need to include the following.

• Company History
• Assets and Liabilities
• Actual profit
• Projected profit
• Proposal to Creditors for payment plan for the debts or proposed dividend

An update to The Insolvency Act in 2000 introduced a new procedure to enable a small company’s appointed Nominee to obtain an initial moratorium where a CVA is proposed. This moratorium will give the Company time to put their proposal to their Creditors. It also prevents the company’s Creditors from starting proceeding against them during this period. The Nominee would send the proposal to the Creditors and shareholders inviting them to meetings to discuss the proposed.

The small company must fulfil two of the following to be able to apply for a moratorium.

• turnover less than £2.8 million
• Balance sheet showing total assets of £1.4 million or less
• Maximum of 50 employees

The Company’s Creditors and Share Holders would have to agree to the proposal; they can request changes, refuse it or agree to the proposal. It Is down to the Board of Directors to convince all the affected parties that this proposal would be more favourable than the company going in to liquidation. For the proposal to be successful they would need 75% of the Creditors to vote for the CVA.

It is normal once an agreement has been made that the Nominee is appointment Supervisor for the term of the CVA. The Supervisor’s duties would include the following.

• All terms are compiled with
• To distribute funds to the Creditors
• Periodically report on progress
• To file for liquidation if the CVA fails

A CVA is not going to be easy but the end result hopefully will save a company and its employees.