Gas. Cook et al., Formal rehabilitation procedures and insolvent firms: Empirical evidence on the British Company Voluntary Arrangement procedure, SMAL BUS EC, 17(4), 2001, pp. 255-271
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.