What is a CVA (Company Voluntary Arrangement)?
A CVA is a legally binding agreement with your company's creditors to allow a proportion of its debts to be paid back over time. 75% of the creditors, by value, who voted need to support the proposal.
Once the proposal has been approved then all* unsecured creditors are bound by the arrangement. The company can carry on trading as normal and the directors remain in control. The CVA is monitored by a supervisor who has to be a licensed insolvency practitioner. The arrangement usually lasts for 3-5 years.
A CVA is the best rescue tool for a company that is viable going forward but is burdened by historic debt. The directors, who remain in control, are able to trade out of their current financial problems provided that they have addressed the problems that caused the debts in the first place.
This page will help you to discover what a company voluntary arrangement does, understand how it works and how it can help you stop creditor pressure and turnaround your company. It is similar to an Individual Voluntary Arrangement (IVA) but for companies.
If you do not wish to read through all the guides and info on the site then you can call our support centre on 0800 9700539 for a no obligation confidential chat. Read on to see the benefits of a Company Voluntary Arrangement, and how it can help you.
*It is possible to exclude creditors from the arrangement by paying them in full but you will need good reason to do so ( let us advise on this )
The Advantages of a CVA For Your Company
- Company voluntary arrangements can improve cash flow quickly.
- Stop pressure from tax, VAT and PAYE while the company voluntary arrangement is being prepared.
- A CVA stop the threat of a winding up petition.
- Costs can be rapidly cut in a CVA as expensive managers can be made redundant.
- Company voluntary arrangements can terminate employment, leases, onerous supply contracts and all with NIL CASH COST.
- Also allows your company to terminate property lease obligations and vacate premises with NIL cash cost (using our expertise.)
- All money owed to creditors is bundled up in one monthly payment to the supervisor.
- Remove employees with no redundancy payments of lieu of notice costs (paid by the Government)
- Terminate onerous customer/supplier contracts.
- Board and shareholders will remain in control of the company.
- A CVA has much lower costs than administration or a Scheme of Arrangement.
- It is not publicly announced like administration is.
- You do not have to say your company is in a Company Voluntary Arrangement to your customers.
Finally, it is ALSO a good deal for creditors as they retain a customer and receive a some of their debt back over time, usually between 20p and 100p in every £1 of debts, depending on what your company can afford to pay back
We can hive the business out to a new clean company, it can trade with customers and suppliers, old company gets a management fee to pay the creditors back.
Check our CVA worries page if still unsure. This covers issues with suppliers, banks, credit ratings, regulators and much more.
A Summary of a CVA
A CVA is essentially a deal between the insolvent company and its creditors; This deal places a legal ring fence, called a moratorium, around the company and stops creditors attacking it. This allows a viable but struggling company to repay some, or all, of its historic debts out of future profits, over a period of time to be agreed.
Directors stay in control of the company, with KSA Group providing support. It can stop legal actions like winding up petitions, if you use a quality, experienced advisor. The directors need to be committed to saving the business. Also a company voluntary arrangement allows the opportunity for the business to be sold or refinance
The process has been part of UK law since 1986 and is one of the Government's preferred rescue options.
Keith Steven talks about turnaround and Company Voluntary Arrangements with the Telegraph. Read the article "A solution to insolvency"
Click this link if you want to see a full flow chart of the CVA process
How much does a CVA cost?
This does depend very much on the total number of creditors, employees, the bank's position, and what level of negotiation is needed. In the end, a company voluntary arrangement is a deal and doing a deal involves talking to people and the stakeholders in the business. It helps if the company has good financial information and there is not a compressed timetable due to aggrth essive legal actions by creditors. By acting early this can be generally avoided.
So how do we pay if we are in financial difficulty?
Simply, once we are instructed all the creditors deal with us and we can effectively freeze payments to creditors until a deal is done. Some advisors say that a company voluntary arrangement is paid for by the creditors. This is a bit misleading and it is likely that personal guarantees will be requested to cover the payments into the company voluntary arrangement and further fees. What happens then if it fails??? Err... you will run up a large bill that you will be personally liable for. We do not ask for these personal guarantees. To discuss how much we charge then please call us on 0800 9700539
Between December 25th 2018 and 25th March 2019 93 companies entered a company voluntary arrangement as a way to restructure their debts and survive.
It might be easier to see the CVA process in a Flow Chart
CVA debate Review 7th November 2018.
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