What is a CVA (Company Voluntary Arrangement)?

A CVA moratorium Under Schedule A1 Insolvency Act 1986 is where small companies in financial difficulty can make voluntary arrangements with their creditors to give them time to recover.

What happens if I enter into a CVA and then can't keep up the payments? Will I be personally liable for any debts? The above question was asked by a potential client and we feel that it would appropriate to respond to this.Firstly, a CVA is a Company Voluntary Arrangement so their is NO automatic transfer of debts to the individual. It is possible that a director may have personally guaranteed the debts of the company so, in that instance, yes they would be liable. Of course, that would have been the case whether the business went into a CVA or not and subsequently failed.So, if the company is not able to keep up the payments that does not mean that the company voluntary arrangement will be stopped and the business goes into liquidation. As supervisor, we would look to see if we can make a modification to the arrangement. This would mean that we would have to call another creditors meeting and put out an amended proposal. One quite common change is to extend the period that the CVA runs for. So, instead of 3-5 years we may look at extending to 5-7 years. Normally, but not always, the creditors do not wish to see a reduction in their total overall dividend. Of course, any modification will need to be voted for by the creditors.If the company is simply not viable anymore, and cannot continue to meet its obligations then, as supervisor, we will petition to wind the company up. It is still possible to go into a creditors voluntary liquidation but that would have to be handled by different insolvency practitioners as otherwise we would have a conflict of interest. I am a creditor/supplier of a business in a CVA: what if it fails? As a condition of the CVA the company must not increase its liabilities to any of its creditors. Therefore you must contact the supervisor of the CVA to point out that you are not being paid. In fact, if a new debt is building up then you are still able to take any legal action necessary to recover the debt. It has to be a NEW debt and not contain the debt that is bound by the CVA. I am already in a company voluntary arrangement that was organised by another insolvency practice but I can't keep up with the payments. The supervisor is unhelpful what can I do? Some CVAs do fail and it is often as a result of badly drawn up proposals. The company tries to pay back too much too quickly or the costs are not cut quick enough at the outset.Well, there maybe a solution to the problem in that someone may want to buy the business, restructure and recapitalise it. We do have contacts and access to some funds that can help with this.

If you are thinking of making a CVA (or IVA/PVA) proposal to your creditors then you have to make forecasts of how the company will perform

If you run an insolvent or struggling Scottish company the chance of rescue is low. Amazingly, less than 1% of insolvent companies are rescued by a company voluntary arrangement or CVA

We want a CVA but we are worried that our intellectual property would be put at risk, do you have a solution? Company Voluntary Arrangement with hive down We are pragmatic experts who will always try to help you find solutions. By using a CVA we can restructure viable but distressed companies. Sometimes that requires solving complex problems that can mean a "plain-vanilla" CVA is not workable. So we have used the following methods to address such complex scenarios: What is a Hive Down? An asset, or the whole business can be hived down to a newly formed subsidiary of "Topco". Let's call this "Bottomco". It has a new clean balance sheet, no existing liabilities, but of course, no credit rating.The board of Topco resolves to sell some or all of the assets to its subsidiary Bottomco and the consideration for this transfer is the shares in Bottomco, or cash payment can be made. Perhaps Bottomco could raise new funds to achieve this. The providers of such monies should consider taking appropriate security and or the bank debt in Topco can be "novated" down to Bottomco.Topco is now an insolvent company, with modest or zero assets other than the shares held in bottomco which are in effect not worth anything much.Topco can then enter a company voluntary arrangement to repay its creditors (generally not including it's secured creditors) say 30p in £1 over 5 years, or 25p in £1 in 3 months. Bottomco may then pay this to Topco in consideration for the release of the shares.The supervisor of the CVA can take a charge over the company and its assets (shares in Bottomco) until the CVA contributions are paid over.After the CVA ends Topco could be wound up or left as holding company for example. The people involved may buy the shares from the liquidator after valuation.This process avoids what is known as "transaction at an undervalue" which is a breach of s238 Insolvency Act 1986. It is relatively simple in concept but legal advice is essential to avoid personal liability. What is a Hive Across? An asset, or the whole business can be hived across to a third party company in consideration for money or shares. This is more complex than a hive down and requires careful planning and legal advice to avoid "transactions at an undervalue" which is a breach of s238 Insolvency Act 1986. Legal advice is essential along with creative advice from CVA experts.KSA works with one of the UK's top insolvency lawyers to ensure that a CVA with a Hive Down, or a CVA with a Hive Across mechanism are well conceived and designed, properly structured, and powerfully executed.If this sounds of interest call Keith Steven on 0800 9700539 or 07974 086779 now.

I am worried about the creditors' meeting for my company's CVA. What should I do to prepare and what is likely to happen? Will anyone attend?

Football clubs tend to go into a company voluntary arrangement for two reasons.Firstly, if the debt is mainly unsecured i.e. the club does not owe the bank money, but owes HMRC and players for instance, then it is the most cost effective solution as it means that the club can continue to be run by the directors and a deal can be struck with the unsecured creditors for a proportion of the debt to be paid out over a number of years. For details of how the CVA works in practice then please refer to our detailed CVA page.However, a CVA does still carry a penalty in the leagues as it is classed as an insolvency event. HMRC is almost always a substantial unsecured creditor and it tends to favour CVA.The second reason is that a CVA is a way for a football club to come out of administration and continue to play in the leagues. Once the administration has protected the immediate position then the club has time to propose a CVA to the creditors. See our page on exiting an administration via a CVASo why don't they go for a CVA straight away?Administration can be arranged quicker and more easily than a CVA if the time pressure is on. This is especially the case if a winding up petition has been issued by a creditor. A CVA, in most cases, needs to have been at least drafted before it can be used to defend a club against a winding up petition. What is more, a football clubs financial affairs are likely to be quite complex with perhaps more than one company being involved in the running of the club.A notice of intention to appoint administrators filed at the High Court can quickly hold off any actions by aggressive creditors effectively buying time to arrange a restructure or indeed a sale of the business. However HMRC is more aggressive in its approach to football clubs as explained earlier. As such, winding up petitions are served more quickly and without much warning. If the petition is advertised quickly then the bank account would be frozen. Administration can stop this happening and allow the club to continue to trade.