What is a Company Voluntary Arrangement (CVA)?

A Company Voluntary Arrangement (CVA) is best described as an arrangement between a company and its creditors regarding debt repayment. This legal procedure allows a company that is struggling financially to propose a plan to its creditors to repay its debts over a specific period while continuing its operations. The key element of a CVA is that it provides the company with some breathing room, allowing it to avoid insolvency and maintain control of its assets, all while reorganizing its finances in a structured manner.

Through a CVA, a company can reach an agreement that is more manageable than immediate liquidation, giving it a chance to recover and potentially return to profitability. Typically, a licensed insolvency practitioner will be involved to oversee the arrangement, ensuring fairness and compliance with legal requirements.

In contrast, the other options present different concepts or misunderstandings of the CVA process. Liquidation is about dissolving a company and selling its assets, which contradicts the CVA's objective of rehabilitation. The proposal of retiring directors without repercussions suggests a focus on corporate governance and personal liability rather than debt management. Lastly, a special audit procedure does not align with the purpose of a CVA, which is primarily a financial recovery tool rather than an auditing process.