Company Voluntary Arrangement

A CVA allows a company to repay a fixed amount in monthly installments, generally over 5 years, and once the end of the term is reached any outstanding debt is automatically written off. Creditors vote on the CVA proposal usually at a virtual meeting and decide whether to approve the CVA. This approach allows the company to continue to trade and pay creditors what it can afford to pay, rather than Liquidation which could return a much lower payment in the pound, if anything at all. 

A CVA is the ideal rescue device for an insolvent company that has accumulated debt with Creditors and needs a way to repay its liabilities and continue trading. Companies usually seek to enter a Company Voluntary Arrangement to avoid Liquidation or to remove Creditor pressure.

A Company Voluntary Arrangement will be most effective if:

· Your company is facing Liquidation.

· The Directors want to make sure that suppliers do not lose monies that they are owed.

· Your company has the potential to be profitable if Creditor pressure is removed.

· Your company has been affected by bad debts or late payers which have affected its short-term financial health.

· Your company has an excellent business model and a full order book, but it is being held back by short-term cash flow problems.

· Your company requires restructuring to be successful.

· Your Directors have failed to negotiate repayment plans with its Creditors.

. Your company was nonessential during the lockdown period and was forced to shut.

A CVA has a number of advantages, not just for its Creditors, but also for the company's Directors and Shareholders. 

· Once the CVA has been set up, legal action such as county court judgements (CCJ’s) or winding up petitions cannot be initiated or pursued, and the business is protected from any Creditor pressure, as once set up is

legally binding.

· Once the CVA is approved, the business will be in a more stable financial position.

· The company pays just one affordable monthly payment to the Insolvency Practitioner, who is appointed as the Supervisor, and this payment is distributed equally among your Creditors.

· No interest or charges from historic debts included in the CVA can be added from the date of approval.

· The core business can continue to trade; this provides the company’s employees and directors with employment.

· A CVA is, in most cases, a cost effective alternative to other insolvency procedures available to a company with financial difficulties, such as administration or receivership.

· At the end of the CVA term, any outstanding debt that remains unpaid is written off, even liabilities to HMRC.