Formal rehabilitation procedures and insolvent firms: Empirical evidence on the British Company Voluntary Arrangement procedure

The British Company Voluntary Arrangement (CVA) is a relatively new debtor rehabilitation process intended to help financially troubled companies, par ticularly SMEs, resolve their difficulties without being forced into liquid ation by secured creditors anxious to recover their funds. This paper is ba sed on a survey conducted by Milman and Chittenden for the Association of C hartered Certified Accountants that is the largest and most comprehensive o n the subject of British CVAs. It has three principal objectives: (i) to ou tline the defining characteristics of CVAs; (ii) to analyse the relationshi ps between CVA performance and contextual factors; (iii) to provide policy recommendations based on those findings. Among other things we find that CV A success is most closely associated with sound fundamental prospects for r ecovery and supportive creditors. Our principal recommendation is that ways should be found of lowering the fixed costs of CVAs to make the procedure feasible for a larger number of small firms.