Restructuring and Insolvency

Company voluntary Arrangements (CVA’s)

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What is a Company Voluntary Arrangement?

A Company Voluntary Arrangement (CVA) is a solution for those with a viable business moving forwards, however have encountered some financial difficulty and their existing liabilities are too great to manage.

On most occasions, the company in question continues trading, making voluntary contributions into the CVA from trading profits, in accordance with the CVA Proposal, accepted by creditors.

A CVA is a process where the business that is in financial trouble aims to reach an agreement with their creditors. This legally binding agreement allows the business in question to pay back all or part of its debts over a fixed period of time. As it is a statutory insolvency procedure, a CVA must be conducted and supervised by a licensed insolvency practitioner.

One of the main benefits of a CVA is that the business can repay its debts (either in full or with an agreed percentage write off) whilst also being able to continue to trade without the threat of enforcement action from its historic creditors who are now bound by the CVA. A CVA will often last between three and five years.

Who can apply for a Company Voluntary Arrangement?

A CVA is only an appropriate course of action for companies in particular situations. It may be the best course of action for your business if you have surplus assets available or trading profits that can be offered to your creditors. A general rule of thumb is that a CVA should offer creditors a better alternative to what would be the case should the company be forced to enter into another insolvency procedure such as liquidation.

Generally, a CVA is proposed by the company’s directors, however the procedure can also be used as an exit route from Administration by a company’s Administrator.

Only a licensed insolvency practitioner can oversee the CVA process, firstly being appointed as what is called the Nominee and then, following approval, the CVA Supervisor.

What are the benefits of a CVA?

Once an agreement has been approved between the company and its creditors, it can offer the following benefits to the business:

  • A lump sum payment made towards existing liabilities
  • Regular and manageable monthly payments towards debts
  • A potential restructure of the business should this be required
  • Legal protection against creditors
  • The ability to continue trading, under the control of the directors
  • Any outstanding unsecured debts are written off at the end of the arrangement term
  • The business continues to trade throughout and following successful implementation of the CVA

How can I apply for a CVA?

A CVA may or may not be the best course of action for your company to take depending on the financial situation.

However our Restructuring & Insolvency team are here to advise you on your company’s financial position, help you understand your options and deliver the most appropriate solution for your circumstances. Visit our contact us page and fill in the form to get in touch or give our team a call on 0800 731 2466.

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