Company Voluntary Arrangement
Company Voluntary Arrangement or CVA, is a legally binding agreement between a company and its creditors, allowing it to pay back a proportion of its debts over time. If you are a Director of a Limited Company that is generally financially viable but is struggling with cash-flow, a CVA might be worth consideration.
The Insolvency Practitioner will initially help you prepare your offer to the company’s creditors and should the CVA be approved, the Practitioner will then ‘supervise’ the arrangement. If you feel you have a viable business that’s struggling under the burden of debt, a Company Voluntary Arrangement could be the lifeline your business needs.
A Company Voluntary Arrangement (CVA) is a Company rescue and restructure option which allows the directors to stay in control of the business but can ensure the survival of your company by freezing debts, freezing legal action and giving you up to five years to repay your creditors.
Advantages of a Company Voluntary Arrangement
- Write-Off unaffordable company debt
- Restructure the existing business and continue to trade
- The Directors remain in control of the company
- The company will make one single monthly payment towards the debts
- The company may be able to terminate expensive Leases and Contracts
You can find a full list of Advantages and Disadvantages of a Company Voluntary Arrangement here.
Stages of a CVA
Initially, we will help you to prepare a Financial Statement for the company. In preparing your statement, we will identify the company’s total debts and help prioritise those requiring immediate attention. We will also help calculate what the company can afford to pay to its creditors each month, based on projected income and expenditure.
We will then help draft your CVA proposal; this is effectively the offer you wish to make to your creditors. The CVA proposal needs to be set out in a specified format. It will confirm your proposed monthly payment and the exact terms of the CVA. Once finalised, it will need to be signed by you, before we circulate it to your creditors.
The proposal will confirm the date of your Creditors Meeting, this will usually be around 3-weeks after the proposal is signed. Each creditor will be asked to submit a vote either ‘for’ or ‘against’ the proposed offer. At the time of the Creditors Meeting, the votes will be counted and if 75% of your creditors (in debt value) are in favour of the CVA, your agreement becomes legally binding on all creditors, whether they voted in favour or not.
Should the CVA be approved by creditors, our role will change from ‘Nominee’ to ‘Supervisor’ of the arrangement. From that point forward, we are responsible for making sure you stick to the terms of the offer you have made.
If you’re not sure what a Company Voluntary Arrangement (CVA) entails or whether it’s right for your company, you’ve come to the right place. Business Insolvency Helpline have helped hundreds of directors and companies protect themselves from creditor pressure.
To find out what steps are appropriate for your business complete the online enquiry form.