In September 2020, 31 companies entered into a voluntary agreement to restructure and survive their debts. Derogatory creditors are therefore bound by a decision by the required majority. Once linked to a CVA, a creditor is prevented from taking action against the company that prohibits the terms of the CVA. As a general rule, these conditions are developed to prevent the creditor from claiming all debts within the scope of the CVA, along with other than the proposed mechanism. A CVA avoids the liquidation of companies and therefore does not require an investigation into the behaviour of the directors who led to the insolvency. Accusations of illicit trafficking or bad practice are avoided and managers can focus on transforming the business. In rare cases, corporate creditors may, as part of the CVA process, push for a change of direction to protect their own interests. If a company in difficulty, with the prospect of becoming profitable again, seems viable and the directors are ready to continue, a CVA could be an ideal way to protect itself from plaintive creditors. The maturities of a CVA should reduce the monthly expenses of the indebted company and create a binding contract for all creditors, which will increase the likelihood of return. The CVA is a formal repayment agreement with creditors. As a business rescue mechanism, it aims to prevent viable businesses from going bankrupt and to offer the best return to creditors. On an annual basis, the Data Protection Commissioner will present creditors with a report on the status of the company`s financial investigation; A discharge and payment account and information on the company`s contributions.
It should also be noted that if this is the case, you are not personally responsible for the debt, as this is a voluntary agreement of the company. Of course, if you have personally guaranteed debts, then there will be another story, but that would happen if the CVA “failed” or not. The company could also seek an agreement or the position of the major creditors with respect to the decision to successfully approve the CVA. It is also important for directors to think about what they need to do in the future to ensure that they avoid further financial difficulties for the business. In most cases, directors continue to manage the business as usual during a voluntary company agreement. The shareholders of the company vote at their meeting and decide whether to approve the proposal, with or without amendment.