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Company Voluntary Arrangement: How to restructure your debt and continue trading

Do you believe your business could become profitable again? If your business has outstanding debts that it cannot currently repay but has the potential to return to profitability, a Company Voluntary Arrangement (CVA) could be your best option.

A CVA allows you to reach a legally binding agreement with your creditors to repay a portion of your company’s debt, usually in monthly repayments, over a certain time period.

This allows your company to gradually pay a certain proportion of its debts over time, allowing it to continue trading while paying its creditors.

Entering into a Company Voluntary Arrangement (CVA) also protects your company against potential legal action by creditors. It also allows your company to simplify its debt payments by combining several outstanding debts into a single recurring payment plan.

 

Is your company eligible?

A Company Voluntary Arrangement (CVA) gives your company breathing room to repay its debts, avoid legal action by creditors and return to profitability. However,  not all businesses are eligible or suitable for this type of arrangement.

Some of the requirements include that:

  • Your company’s directors and your insolvency practitioner must both have confidence that your company can recover and return to profitability
  • Your company must currently be either insolvent or contingently insolvent
  • Your company must currently have sufficient cash flow (or projected cash flow) to ensure that enough capital will be raised to repay creditors on time

A CVA is a binding contract between your company and its creditors. Because of this, in addition to the above criteria, at least 75% of your creditors need to agree to the terms of your proposed arrangement in order for it to be accepted.

Does your company meet these criteria? If so, a CVA could be the ideal way to return it to profitability and repay your debts gradually while protecting yourself from any possibility of creditors pursuing legal action.

 

What benefits does a Company Voluntary Arrangement offer?

A Company Voluntary Arrangement (CVA) offers a wide range of benefits for your business. One of the biggest benefits of a CVA is that it gives yourself and your company some room to breathe while you focus on repaying creditors and recovering your business.

Entering into a CVA also protects your business from legal action launched by creditors or HMRC as long as it complies with the terms of the arrangement.

A CVA also simplifies your accounting processes by centralising all of your debts in a single payment each month.

Beyond simplifying your payments and allow your business room to breathe, a CVA can rebuild your company’s relationship with its creditors by ensuring they receive between 20% and 100% of what they are owed.

 

 

Company Voluntary Arrangement (CVA)

 

Preparing a Company Voluntary Arrangement

A Company Voluntary Arrangement (CVA) is a legally binding agreement between your company and its creditors. The process starts with your company preparing a CVA proposal, which outlines the terms of your company’s CVA.

To do this:

  • Consult with an insolvency practitioner and work out whether or not a Company Voluntary Arrangement (CVA) is your company’s best solution.
  • An insolvency practitioner will then prepare a proposal to present to the creditors.
  • Once your company’s directors have agreed upon the terms of the Company Voluntary Arrangement (CVA), it will be filed with the court and sent to creditors.
  • At least three weeks after creditors have received the CVA proposal, creditors and shareholders will vote on whether to approve the CVA or reject it.
  • Creditors with ownership of at least 75% of the company’s debt must approve the CVA in order for it to become an active agreement.

Once your Company Voluntary Arrangement (CVA) is approved, any legal actions creditors have launched against your company are stayed. Your company is required to make regular payments to a CVA trust to repay its creditors over the agreed upon time.

Is a CVA your best option?

Do you think a CVA could save your company? We’ve helped hundreds of companies return to profitability and avoid going out of business using CVAs, and we would like to help your company get back on track using the same arrangement with creditors.


Contact us today for FREE to learn more about how we can help you and your business.

We have a team of advisers who have helped hundreds of businesses around the UK that have faced financial pressures on every scale. You are not alone.

Call us free and in confidence on 0800 599 9656 and together we will sort things out.