When drawing up a CVA proposal, your appointed insolvency practitioner will carefully assess your company’s financial position including its assets, liabilities, cash flow, and future trading predictions. Using this information, they will put together a CVA proposal and present this to your company’s creditors.
There are two main reasons CVA proposals are rejected. In many cases this is because the repayment amount offered is simply not enough to satisfy creditors, while other proposals are rejected due to creditors not having confidence in the company’s long-term viability and therefore doubt whether the company will be able to adhere to the scheduled repayments for the duration of the CVA.
Therefore, if the company cannot adequately demonstrate its likelihood of returning to profitability, it is likely that the creditors will reject the CVA proposal outright. Alternatively, creditors may believe they can increase their returns by forcing your company to enter into an alternative insolvency arrangement such as administration or liquidation instead.