A CVA (Company Voluntary Arrangement)
is a flexible and effective method of dealing
with debt. It provides protection from your
company’s creditors and allows it to continue
trading unlike Liquidation
which is almost certainly the end of the road
for a company.
A CVA is a debt forgiveness agreement
with your company’s creditors to only repay
a proportion of the amount owed in full and
final settlement. During a CVA, the control
and management of the business remains with
the Board of Directors and, in return for the
company committing to repay an affordable part
of the debt, its creditors will write off the
balance leaving the company debt free.
CVAs were introduced to the UK
as part of the Insolvency Act 1986 as a positive
alternative to liquidation that would help companies
resolve their debt problems.
The payments that are offered
to creditors in a CVA can be made from a variety
of sources. The most popular being:
- Affordable monthly payments
from business turnover
- A lump sum from a re-financing
deal or a third party
- Sale of an asset
- A combination of the
above
The amount your company pays will
depend on available income and is agreed and
fixed with creditors up front so there are no
nasty shocks during the CVA. You will know exactly
what your company will have to pay, and how
long it will have to pay for.
For a CVA to be approved, a majority
in excess of 75%, in value, of your creditors
who vote on the CVA, is required.
Once the CVA is approved, creditors
are obliged to freeze interest and are no longer
able to pursue the company for payment. Once
all of the agreed payments have been made, the
CVA is concluded and the balance of the company’s
debt is legally written off leaving it debt
free.
We can advise on whether a CVA
is the right solution for your company. We can
then work with you, from formulating an offer
to your company’s creditors, through to
seeking approval from creditors.
Our CVAs are crafted, always with
the core value that they should be sustainable
and achievable, yet realistic. We believe that
this is the only way that an CVA works and should
result in a win/win situation for you and your
creditors.
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