Company Voluntary Arrangement

What is a CVA?

It allows your company to continue trading and avoid liquidation, which would result in the sale of its assets to repay its debts in full. 

The CVA proposal is voted on by your company's creditors, and if it is approved it becomes binding on all creditors, even those who did not vote in favour of it. 

Is a CVA a good option?

Whether a company voluntary arrangement (CVA) is right for you depends on your specific circumstances. A CVA is a formal agreement between a company and its creditors to repay its debts over an extended period of time, and it's typically used as a way for a struggling company to avoid liquidation and continue trading.

To determine if a CVA is right for you, consider the following factors:

1. Financial situation: Is your company unable to repay its debts as they become due and can it realistically pay its creditors over a longer period of time?
   
   

2. Creditor support: Are your creditors willing to support a CVA and receive reduced payments over time instead of demanding full payment immediately?
   
   

3. Future prospects: Does your company have a viable future, and is a CVA the best way to allow it to continue trading and repay its debts over time?
   
   

It's important to seek professional advice from an insolvency practitioner who specialises in CVAs to fully understand the implications and determine if a CVA is the right solution for your company.

Setting up a CVA

To get a CVA, the following steps must be followed:

1. Seek professional advice: It is important to get advice from an insolvency practitioner who specialises in CVAs.
   
   

2. Preparation of a proposal: The proposal must include details of the company's financial situation, a plan for repaying debts over a set period of time, and a statement of the company's future intentions.
   
   

3. Obtain creditor approval: The proposal must be approved by at least 75% ((by debt value) of the company's creditors by value of debt.
   
   

4. File with the court: Once the proposal has been approved by creditors, it must be filed with the court.
   
   

5. Monitor the CVA: The company must adhere to the terms of the CVA and report regularly to the creditors and the insolvency practitioner.
   
   

It's important to note that a CVA is a serious matter and can have significant consequences for the company, its owners, and its creditors. It's essential to get professional advice and fully understand the implications before proceeding with a CVA.

Potential problems & risks with a CVA

A company voluntary arrangement (CVA) can be a useful tool for a struggling company to avoid liquidation and continue trading by repaying its debts over an extended period of time. However, there are several potential risks and drawbacks associated with a CVA that can cause it to go wrong:

1. Creditor opposition: Creditors may not agree to the terms of the CVA, or they may believe the company is not offering a fair settlement.
   
   

2. Defaulting on payments: If the company is unable to make the agreed payments, the CVA may fail, and the company may face liquidation.
   
   

3. Damage to reputation: The company's reputation may be damaged by the perception that it is in financial difficulty, which could make it harder to secure new business.
   
   

4. Director liability: The directors of the company may be held personally liable for the company's debts if the CVA fails.
   
   

5. Impact on shareholders: Shareholders may see their holdings significantly reduced or diluted if a CVA is implemented.
   
   

It's important to fully understand the potential risks and drawbacks of a CVA before proceeding and to seek professional advice from an insolvency practitioner who specialises in CVAs.

CVA Costs

The costs involved in a company voluntary arrangement (CVA) will vary depending on the specific circumstances of the company and the complexity of the arrangement.

Some of the costs that may be incurred include:

1. Insolvency practitioner fees: An insolvency practitioner will be appointed to oversee the CVA process, and their fees must be paid. These fees will vary depending on the practitioner, the complexity of the CVA, and the amount of work involved.
   
   

2. Court fees: There may be court fees associated with filing the CVA proposal.
   
   

3. Advertising costs: The company may be required to advertise the CVA proposal in a national newspaper to notify its creditors.
   
   

4. Valuation costs: A professional valuation of the company's assets may be required to support the CVA proposal.
   
   

5. Legal fees: Legal fees may be incurred if the CVA proposal is complex, or if there is any dispute between the company and its creditors.
   
   

6. Monitoring costs: The insolvency practitioner will need to monitor the company's compliance with the CVA, and their fees for this service must be paid.
   
   

It's important to note that these costs must be paid in addition to the payments made to the company's creditors under the terms of the CVA. It's essential to fully understand the costs involved and seek professional advice from an insolvency practitioner who specialises in CVAs.