What is a Company Voluntary Arrangement (CVA)?
A Company Voluntary Arrangement is one of the least published tool in a Insolvency Practitioners armour. We have over the years been able to work with accountants and business advisors in repairing their client’s financial position by deferring the payments to its creditors over a sustainable period, reducing their outstanding debts or providing the Company with a breathing space in order to informally restructure itself.
A CVA is a formal agreement between the Company and its creditors which is supervised by an Insolvency Practitioner allowing the deferral of repayments to creditors over a period sustainable to the Company. This process might include an element of debt forgiveness.
All creditor claims are agreed at a meeting of creditors and payment structure usually in the form of a monthly instalment is agreed by all parties.
The Benefits of a Company Voluntary Arrangement
- A CVA allows the Company to continue to trade under its existing directors.
- A CVA Supervisor provides monitoring and expert advice to the Company and its directors during its duration.
- The costs of instructing professionals associated with a CVA are generally lower than an Administration.
- A CVA is a cheaper alternative to raising further by avoiding charges, costs and interest.
- CVA is particular useful for those businesses that have external licences or agreements in place which will be breached in an Administration such as Operators Licences in the motor trade or haulage industry.
- Creditors included in the CVA are bound by its terms and are unable to commence any enforcement actions.
- Practically it has been useful in dealing with Company’s financial position were a Company’s assets have a significant value were by the existing management are unable to purchase it back through an Administration.
Haulage Company with a turnover of £10 million
We worked closely with the directors and the accountants of a Company who had diversified to a new sector and due to the costs involved were unable to meet their liability to HM Revenue & Customs (“HMRC”). We met and negotiated with HMRC on behalf of the Company and proposed a CVA in order to repay HMRC indebtedness over a 12 month period. The Company was unable to enter Administration as this would have resulted in the loss of its operator’s licence.
Alternatives to Company Voluntary Arrangement:
We believe in working closing with the Company directors and their exiting advisors in considering all the options that may be available for the Company and therefore it is always advisable to seek independent advice from a Licensed Insolvency Practitioner. However, other options available to the Company include:
Working with Accountants/ Business Advisors:
We work closely with the Company’s exiting advisors with the scope for the advisors to prepare the Company’s financial accounting records that will be required within the CVA document as we appreciate that you know your clients business better.
If you feel that you may have a client who may benefit from this procedure please contact one of our experienced and qualified members of staff to explore the options available.