As FIFA World Cup is soon taking over our screens once again, we're looking at how CVAs work for football clubs as well as the impact of administration on leagues.
Why do football clubs go into a CVA?
Usually, the club has racked up a lot of debt and owes money to HMRC and the club's players. A Company Voluntary Arrangement allows the football club to continue running while a repayment plan is set up over a number of years. It is often the most cost-effective solution.
While there is a small penalty for clubs entering a CVA, it's far better result than than administration. Often clubs exit administration and go into a CVA to protect the business. If creditors are threatening legal actions, like Winding up Petitions, there may be little time for CVA proposals to be prepared, therefore the club can go into administration temporarily while information is being collected.
Once in a CVA, directors can regain control of the football club and the club can continue playing in the league.
For more information on insolvency and penalties, read out page on Football Creditors' Rule.