CVA Business solution
CVA Insolvency Solutions
A Company Voluntary Arrangement (‘CVA’) is applicable where Directors believe that their Company has a viable business which can return to profitability.
A Company can use a CVA to pay an amount to creditors over a period of time and at the end of the CVA any balance outstanding to creditors is written off. Creditors are required to agree to a CVA but should they agree the Company will be able to continue trading.
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What is a Company Voluntary Arrangement? (CVA)
A CVA can be a very powerful Company rescue tool allowing a Company to continue trading and Directors to remain in control. We will assist you in formulating a proposal to creditors and can advise upon matters to be included in the proposals increasing the likelihood of them being agreed by creditors.
The CVA Process
What are the advantages and disadvantages of CVA?
Advantages
- The Company is allowed to continue to trade.
- Director remain in control of the Company and business.
- There is no requirement to investigate the conduct of Directors.
- There is less publicity regarding the Company entering a CVA compared to other insolvency processes.
- Stop pressure from tax, VAT and PAYE while the CVA is being prepared.
- Enables the Company to restructure and cut costs.
- Usually a better return for creditors than other insolvency processes.
- Allows the termination of onerous contracts which will then be included in the CVA (including contracts of employment).
- Variations to the original CVA proposals can be presented to creditors should there be a requirement to vary the terms of the original proposals (any such variation requires the agreement of creditors)
Is a Company Voluntary Arrangement ('CVA') right for you? -
Once the CVA proposals have been drafted and approved by the board of directors, a Nominee, prepare your report on the proposals, file the document at Court and circulate them requesting that creditors vote for their acceptance. They will handle all creditor questions regarding the proposals and deal with all procedural matters. Once the CVA is approved they then monitor the Company's compliance with the CVA and become the CVA's Supervisor allowing the Directors to concentrate on their business.
Disadvantages
- A CVA requires 75% of those creditors who vote in the process (by value of debt ) to agree to the proposals.
- The Company’s credit rating will be affected making it difficult to obtain any credit.
- A CVA can last a long period of time (usually 3 – 5 years).
- Should the Company fail to adhere to the terms of the CVA then the CVA could fail and creditors could take legal action and it could result in the Liquidation of the Company
Company Voluntary Arrangement FAQ's
What is Company Voluntary Arrangement?
A Company Voluntary Arrangement (‘CVA’) is a legally binding agreement between the Company and its creditors. It provides a solution by which companies in distress can formulate a plan to pay monies towards their debts over a fixed period of time. The CVA requires the approval of 75% of creditors, by value, who vote, to support the CVA proposals to be accepted. Upon successful conclusion of the CVA any remaining debt is written off and the Company continues to trade as normal outside of the CVA. The CVA is a powerful tool to allow the Company to address issues within the business, cut costs and restructure its trading activities.
Any Company looking to consider a CVA will need to seek the assistance of a Licensed Insolvency Practitioner who can advise Directors on the most appropriate course of action given the particular circumstances.
Who is a CVA for?
- If the Company has a viable core business with prospects of becoming profitable (possibly following a restructure or cost reduction exercise)
- The Company has suffered the effects of a one-off incident such as a significant bad debt or can address the cause of the current financial situation
- The Company wishes to restructure its business to return to profitability but wishes to avoid Liquidation or Company Administration
Alternative solutions to a CVA
It may be that a CVA is not the right solution for your company. There are other solutions available and the right route is very much dependent upon your circumstances.
Administration – This solution quickly protects the Company from creditor pressure and allows the Company to try and formulate a rescue plan. This process can conclude by proposing a CVA to creditors or by selling the business in what is call a pre-pack Administration.
Liquidation – It may be that the Company is unable to continue and that there is not a business to save. In this scenario a liquidation may be the best option for your company.
