Throughout the length and breadth of the UK, chains of retailers have been closing their doors and making swathes of redundancies as part of these CVAs, many of which fail to ever result in the business recovering.
In fact, more than half of the retail CVAs out in place since this procedure was introduced in the mid 1980s have failed to lead to the retailer escaping eventual collapse. Some argue that the fact that CVAs allow the existing (and often flawed) management team to remain in place is the problem.
So why are they still such a popular option for struggling retailers and does buying a business from a CVA present opportunities?
A Company Voluntary Arrangement (CVA) is a legally binding agreement struck with a company’s creditors to allow it to pay back all or some of its debts over an agreed period of time, usually 3 - 5 years. A company can’t just decide to enter into a CVA - it must be approved by 75 per cent (by value) of voting creditors.
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