Company Voluntary Arrangement
A company voluntary arrangement (‘CVA’) allows a business to continue to trade in its current form or provide for a controlled closure.
At BRI Business Recovery and Insolvency, we work with clients to help them with their recovery or insolvency in various capacities. One of the areas we specialise in is Company Voluntary Arrangements. If you are facing financial difficulty or insolvency or would like to discuss anything with our team, please contact us.
What is a Company Voluntary Arrangement?
A CVA is a legally binding agreement between the company and its creditors to repay some or all of the company’s debt over a period of time.
In a CVA, the directors remain in control of the company at all times.
An insolvency practitioner, acting as Nominee, assists the company to create a proposal to creditors which is drafted and supported by financial forecasts.
How does a CVA work?
Assuming that at least 75% of each class of creditor, by value of debt, votes in favour of the CVA then it is approved and legally binding on all creditors, even those that didn’t vote or voted against it.
The insolvency practitioner who has been appointed to act as Nominee typically becomes the Supervisor once the CVA is approved. The Supervisor’s role is to ensure that the company adheres to the terms of the CVA, to collect any agreed payment contributions and to distribute those to creditors.
Why a CVA is a good rescue tool
A CVA is a good rescue tool for a company that is viable but is burdened by historic debt. It allows the company to trade on and remain in business. A CVA can also allow a period of breathing space to allow a company to carry out a controlled closure in certain circumstances. Here are some other reasons why we would recommend a CVA:
- A Company Voluntary Arrangement offers crucial protection for your business by preventing creditors from taking or continuing legal action against the company – they are legally bound by the arrangement.
- During the CVA, your company debts are consolidated into a single, manageable monthly payment.
- Your company’s directors and shareholders retain full control throughout the CVA procedure. This is different from company administration. There is also no requirement to publicly advertise the CVA albeit it is registered at Companies House.
- A CVA can be a safer options as it can prevent a winding-up petition from being approved which would force the company to close — if proposed within 7 days of receiving the petition it is likely that the court would await the outcome of the CVA proposal before proceeding with the winding up hearing.
- The CVA can help to improve cash flow as the debts are frozen, repayable over a period of up to 5 years usually and you may not need to pay creditors in full.
Company Voluntary Arrangements from BRI
If you are looking for more information on Company Voluntary Arrangements, then contact our team today. There is no charge for doing so; it is done in complete confidence and without obligation.