Just a quick note to say a big thank you to all the staff at KSA, our CVA was passed today by creditors voting in an overwhelming number including HMRC to accept the proposal as prepared by KSA.
The road to reach today’s conclusion has been bumpy, but at each stage your team has supported and guided us through the issues and we have reached a very satisfactory outcome to the benefit of customers, staff, all creditors and shareholders.
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 usual, 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 information on the site, then you can call our support centre on 0800 970 0539 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)
Are you a board director that is currently going through the process of a CVA? If so then please look at our mentoring and advice service
- Arcadia collapses with a £510m pension deficit and £800m owed to creditors
- Footwear chain Dune launch a CVA
- Company Insolvencies in Q4 2020 were lower compared to that of Q4 2019 for England, Wales, Scotland and Northern Ireland
- Claim that retailers are abusing CVAs: BRC responds
- Monthly Insolvency Statistics: November 2020
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 can 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, payment/compliance obligations under 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 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 25p 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, and it can trade with customers and suppliers. The 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.
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 aggressive 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, please call us on 0800 970 0539
In September 2020 31 companies entered a company voluntary arrangement as a way to restructure their debts and survive.
Watch the video below to understand a bit more about how our CVAs work.
It might be easier to see the CVA process in a Flow Chart
Author of this page is Keith Steven who is the Managing Director of KSA Group Insolvency Practitioners
CVA debate Review
- What Happens If My CVA is Rejected?
- Business Rescue and Insolvency Services
- Can't Afford To Make Redundancies - Worried Directors Guide
- HMRC and the CVA Process
- Company Voluntary Arrangement and CVA Voting
- Advantages and Disadvantages of a Company Voluntary Arrangement or CVA
- Complete Experts Guide
- Company Voluntary Arrangement CVA Moratorium
- HMRC Voluntary Arrangement Service and CVA
- Making Employees redundant in a CVA
- CVA Advice For Landlords
- Company Voluntary Arrangement or CVA Frequently asked questions
- Administration followed by a CVA
- Retailer rescue with CVA
- How to terminate leases in a CVA
- Company Voluntary Arrangements (CVA) - Worries and Mistruths!
- Company Voluntary Arrangement and CVA Process and Procedures Explained
- What Happens if a CVA Fails?
- Financial Forecasts in a CVA
- Company Rescue in Scotland CVAs are supported by HMRC
- Rent Reductions in a CVA
- Hive down and Hive Across to protect contracts and IPR in a CVA
- What happens at a CVA creditors meeting
- Why do football clubs go into a company voluntary arrangement?
- Administration or Company Voluntary Arrangement CVA
Worried about poor cashflow? Covid-19?, How to pay wages on pay day? For expert advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539
Please note that the guide includes updates due to Covid-19 For instance there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading. A new 20 day moratorium for distressed businesses has also been introduced.