Bury Football Club have (in principle) agreed to enter into a CVA (Company Voluntary Arrangement) proposal to pay its’ creditors (which includes its players and staff in full but around one quarter of the sums owed to other creditors) over a fixed period. A virtual meeting of creditors is planned for 9 July 2019 to approve the club’s proposal (where 75% of the creditors by value owed need to support the proposal for it to pass).
The immediate effect of the CVA is that a winding-up petition and the threat of entering into administration is avoided- for now.
What is a Company Voluntary Arrangement (CVA)?
A Company Voluntary Arrangement (CVA) is an agreement between a company and its’ creditors to allow a proportion of the debt owed to be repaid over a fixed period of time. The proposal must be agreed to by 75% of the creditors by value for it to pass.
A CVA creates a moratorium on debt enforcement action (such as a winding-up petition being presented) by creditors against an insolvent company (such as Bury FC in this case). A CVA allows the business to carry on trading and keeps the directors in control of the company.
What are the advantages of a CVA for your business?
- All monies that are owed to creditors can be subsumed into one monthly payment;
- A CVA stops the threat and presentation of a winding-up petition;
- Improves cash flow as soon as the CVA is agreed to by 75% of the creditors by value;
- Terminate onerous supplier contracts;
- Directors and shareholders retain control of the company;
- Lower costs than a scheme of arrangement;
- Privacy as a CVA is not advertised or announced (unlike a winding up petition or administration).
On what grounds can a company oppose a winding up petition?
Where the grounds to challenge the petition exist it would be sensible to oppose the winding up petition. A winding up petition may be challenged by a company on the following grounds:
- the debt alleged in the demand to be owing is genuinely disputed on substantial grounds by the company;
- the company has a genuine right of set-off against the creditor which exceeds the amount claimed in the demand; or
- in certain other limited circumstances (for example such as Jurisdiction, Company likely to become insolvent, Technical or procedural error or Delay).
Instruct Specialist Insolvency Lawyers
We provide a no cost initial case review to establish whether or not we can help you. We are a specialist City of London law firm made up of Solicitors & Barristers and based in the Middle Temple Inns of Court adjacent to the Royal Courts of Justice. We are experts in dealing with matters surrounding insolvency in particular issues. Our team have unparalleled experience at serving statutory demands, negotiating with debtors/creditors, setting aside statutory demands and both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.