How does a Company Voluntary Arrangement (CVA) work?

A CVA, short for Company Voluntary Arrangement, lets a company in financial difficulty organise a voluntary arrangement with business creditors to repay all or part of its corporate debt over a fixed period of time.

The directors will usually retain control of the business and have a legal duty to prioritise the interests of creditors.

If the company’s creditors agree, the company can then continue trading as normal.

But, it’s common to see some store closures for businesses to quickly recover costs from loss making stores.

Retailers who have undertaken CVAs in a bid to keep trading include New Look, Homebase and Mothercare.

Restaurant businesses have also been seeking to cut their costs with store closure programmes, with Carluccio's, Byron Burger, Jamie’s Italian and Prezzo all pushing through CVAs in 2018.

What are my rights if a company is going through a CVA?

When a company is operating under a CVA, the plans for its recovery will usually involve selling parts of the business.

Most often, you’ll see the impact of this through store closures and restricting of jobs.

The stores it chooses to save and its website, for example, will usually continue to operate as normal.

When you buy from the parts of the business still in operation, your rights should remain the same.

You have the right to cancel your online order, and the right to return a faulty good in exactly the same way.

If the company later goes into administration or stops trading altogether and goes into liquidation, your rights are diminished.

If you’re looking to make a claim for faulty goods for a company that’s now gone bust, read our guide on how to get your money back if a company goes bust.

Can I use my gift card if a company is going through a CVA?

If a company is still trading under a CVA there is no guarantee that gift cards will be honoured.

But, many retailers in recent years have continued to accept and sell gift cards and vouchers.

Check with the retailer before you use the gift card. If you can still use it, we’d recommend you spend it sooner rather than later.

If a company does not meet its payments under the CVA and it then goes into administration or stops trading altogether and goes into liquidation, the law imposes a strict hierarchy of creditors to be paid out from any remaining assets.

If you have a gift card or voucher when a company goes bust, you’ll be classed as an unsecured creditor and will frequently receive nothing.

If you’re planning on purchasing a gift card from a company who’s going through a CVA, you might wish to wait until they announce an improvement in profits.

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