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What is a CVA?
A CVA is a legally binding agreement with your company's creditors that allows a proportion of its debts to be paid back over time. 75% of the creditors, by value, who voted need to support the proposal for the CVA.
Benefits & Risks of a CVA
Benefits of a Company Voluntary Arrangement
Company Voluntary Arrangements can improve cash flow quickly
Stop pressure from HMRC tax, VAT, and PAYE while the company's voluntary arrangement is being prepared
A CVA can stop the threat of a winding up petition
All money owed to creditors is bundled up in one monthly payment to the supervisor
You do not have to say your company is in a Company Voluntary Arrangement to your customers
A CVA has much lower costs than administration or a Scheme of Arrangement
Risks of a Company Voluntary Arrangement
A CVA adversely affects the company’s credit rating, making it harder to obtain credit from new suppliers
A minimum of 50% of stakeholders and 75% of creditors (by value of debt) need to agree to the terms of the Company Voluntary Arrangement before it can be passed.
The length of a CVA can be between three and five years. This may seem like a long time for some directors and stakeholders
Organisations such as banks are not bound by the terms of a CVA leaves companies open to administrators.
If a CVA fails for whatever reason, such as not keeping up with repayments, creditors can take legal action against the company.
How do I apply for a CVA?
01
It’s important you don’t trade whilst insolvent, and if you believe the company still has a future and can prove it, you should contact an IP to apply for a CVA.
02
Before committing to the arrangement, you should be aware of the advantages and implications that the process carries. You will need input from directors and creditors before being actioned.
03
If you are recommended a CVA, they'll give you information on how to apply, and explain the risks and benefits of a Company's Voluntary Arrangement.
Other Business Debt Solutions to Consider:
A CVL is short for a Company Voluntary Liquidation
Provide some relief from debt repayments.
A legal process for businesses struggling with debt.
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