Company Voluntary Arrangement (CVA)2018-01-05T09:18:02+00:00


Company Voluntary Arrangement

A Company Voluntary Arrangement (‘CVA’) is a formal process that enables a financially troubled company to reach a legally binding agreement with its creditors to pay all or part of its debts over an agreed period of time. A company will usually be required to make monthly contributions over a fixed period of time, or alternatively, will agree to sell its assets and pay creditors from the proceeds. It allows directors to retain control of the company whilst attempting to trade out of difficulties. Once approved, the arrangement will be overseen by a licensed Insolvency Practitioner, known as a Supervisor.

A CVA is considered a recovery procedure. As with an Administration, it is suitable for a company that is struggling financially but has a viable business. If your company is being threatened by a creditor such as HM Revenue & Customs, or is being threatened with legal action such as winding-up proceedings, a CVA could prevent creditors from taking any further action against you.

A CVA must be approved by a majority of 75% or more in value of the company’s unsecured creditors, the majority of which must not be connected to the company. Once approved, all creditors are legally bound under the terms of the arrangement, including all non-voting creditors, or creditors that did not receive notice of the meeting required to approve the CVA. Creditors will require assurance that the CVA terms are realistic and achievable. Creditors will generally support a CVA in the knowledge that they are unlikely to recover the full amount due and owing to them, as they are likely receive significantly less should the company be placed into Liquidation.

Detailed projected forecasts are required to evidence the company’s ability to maintain the contributions under the terms of the CVA, as well as maintaining its day to day funding requirements. As licensed Insolvency Practitioners, we can assist directors to prepare such forecasts, prepare the CVA proposal, seek support from the company’s creditors and to seek the appointment as Supervisor of the CVA.

It can take several weeks to prepare a viable CVA proposal for creditors to consider. If your company is considered a small company under Section 382 of the Companies Act 2006, a small company moratorium can be obtained to protect the company from creditors whilst a CVA proposal is being prepared. For larger companies, it may be necessary to place the company into Administration to protect it whilst a detailed CVA proposal is prepared. This will also give the Administrator an opportunity of discussing the proposed CVA with the company’s bankers and other major creditors. The directors will regain control of the company from the Administrator following the approval of the CVA.

Advantages of a Company Voluntary Arrangement

A CVA has many advantages for you and your company including:

  • It is flexible, legally-binding and offers protection from creditors;
  • A company can continue to trade with directors maintaining control;
  • A CVA is not advertised publicly as with other insolvency procedures;
  • It can prevent proceedings being issued against a company;
  • It offers reassurance to creditors that some of the debt will be repaid;
  • A company can be restructured to improve overall profitability;
  • Debt repayments are consolidated into a single monthly payment;
  • Cash flow can quickly improve creating increased working capital;
  • A CVA can be cheaper than other available insolvency procedures; and
  • Supplies may agree to continue trading with the company.

Contact Our Team

If your company is experiencing financial difficulties, we can work with you to identify the most appropriate solution. We have helped companies of all sizes across many different sectors. We understand that being pursued for unpaid debts is a hugely stressful time. If you believe your business is potentially viable but is struggling financially, a CVA may be the most appropriate solution. Contact us on 0800 061 4002


 

 

Contact Us Today

For free, impartial advice,
call us today on

0800 061 4002
MAKE AN ENQUIRY

Why Cromwell?

  • One of the UK’s leading independent insolvency and corporate recovery specialists
  • Trusted advisers to accountancy practices, law firms, directors and shareholders.