Company Voluntary Arrangements - Worries and mistruths!

We Cannot Use The CVA Mechanism Because: Or the classic worries we have heard for the last 13-14 years doing CVA’s!

So you are considering a CVA, or your advisors, KSA Group (the authors of this site) of course, have carefully recommended using the CVA to rescue and restructure the company. But the directors have a lot of fears and worries about taking this path.

Clearly this is a huge decision for the directors to make. Make it wisely by reading all of the relevant pages on this site.

We will lose our customers!

No you will not. In over 200 cases people have said this to us and we understand why. But in practice we have rarely seen a customer walk away from a business that is delivering its products and services; well and on time. Shouldn’t that be your focus? Stop firefighting and get back to doing your main roles. This way customers will stick with your company. But keep firefighting and sooner or later your performance will fall and their business may suffer. THEN you may lose them.

Should we tell our customers then?

Many people say we cannot tell our customers that we are “doing a CVA” or they will walk away. That is your decision and one that should be based upon knowledge of the business relationship, their requirements and any contracts. Sometimes the best answer is to tell them with us in attendance. Often this is better than a competitor telling them that you have “gone bust”?

Think what you would feel if a major supplier did not tell you of their problems and their plans to deal with it, but instead they hear from a local rival that you have gone into liquidation?!

Our creditors will not supply us!

Yes they will. They need to maintain their sales to your company, as much they don’t like losing the money owed. We spend a lot of time on “creditor liaison”. By carefully explaining what the company is doing, how it will be in their best interests and asking them to work with the company and ourselves we ensure that creditors are kept informed and on side. Don’t expect any credit terms or any favours, but being honest and open with them pays dividends in the long run. After all, it would actually be simpler to simply liquidate and walk away wouldn’t it?

You are trying to maximise creditors’ interests by doing the CVA thus it’s in their interests to work along with the plan.

Our staff will walk out!

Generally they will stay. If they walk out they will lose any employment rights and will not receive any redundancy, lieu of notice payments from the company or the DTI. Further, they will not be eligible (generally) for unemployment/job seekers benefit. So we recommend being open and honest and working out a plan for and with the employees. Proper communication is vital. Some employees may lose their jobs as part of the restructure; this is painful and at times inevitable. We can work with you to achieve this.

The bank will appoint a receiver/administrator!

Again this is simply not true IF a cogently structured plan and a well, presented approach to the bank is used. Most banks are much more supportive now of “out of court” restructurings like CVA as it avoids the usual huge asset meltdown and costs of say administration. Although the CVA cannot affect the rights of the bank or lender they are stakeholders and should be closely involved in the process.

The HMRC will not support a CVA!

Yes they will if it is a properly structured, well thought through plan and the company has been compliant with tax rules in the past (being on a time to pay deal is being compliant!)  The HMRC agency that decided on these proposals is called the Combined Voluntary Arrangement Service. Currently it votes in favour of c73% of all proposals. However, we have a >95% approval record.  Please read our latest page on the HMRC and the CVA Process also our page on the Voluntary Arrangement Service and CVAs

I am told that we have to pay 100% of the debt in 2 years? We cannot afford that!

Completely and utterly false! There is no minimum or maximum amount or time frame. But you need a good quality well planned proposal. A 5 year period is the norm and in our CVA’s around 35p in £1 is the average minimum amount repaid.

I will lose any tax losses if the company goes into a CVA 

No you won't.  Even if the company's assets are transferred to another business in the form of a "hive down" then the losses can be transferred provided some generous conditions are met.  For more details read our CVAs and corporation tax issues page here

Still got questions? then click here for CVA’s FAQ’s or here for a flowchart or give our team of advisors a call on 0800 9700 539 now, or contact us by email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it