CVA and the last chance saloon

My company is in serious financial difficulty. To avoid administration, we have been advised to put together a restructuring proposal to offer their shareholders who invested.

There are concerns that disgruntled shareholders will not support it. Does the company have powers to compel shareholders to agree to the proposal if it is in the company’s best interests? If not, and they reject it, is administration our only option?

Once a company is insolvent, the interests of creditors override those of shareholders. It is possible by proposing a company voluntary arrangement (CVA) to sideline shareholders. They get a vote on any restructuring but, if push turns to shove and they disagree with the creditors vote, the creditors win.

This is a powerful tool but you need to line up the votes of your suppliers and other debt providers in advance. If the reality is that shareholders have no economic interest in the company, they can be ignored in a CVA. One advantage of the CVA is that you can get landlords and other leasing creditors to the negotiating table, usually to do sensible deals.