A CVA can protect your business, ring fence your business assets and help you avoid liquidation

Stop Legal Action

from creditors including
HMRC

Consolidate Debts

into one monthly payment based on business profits

Any Remaining Debts

after the CVA ends are written of

What is a Company Voluntary Arrangement?

A CVA is a contract between a company and its creditors to allow it to restructure its debt over a longer period of time, usually between 3 and 5 years. The company makes regular payments to the Supervisor (a Licensed Insolvency practitioner) who will distribute funds to creditors. The directors retain control of the company and its trade throughout the CVA.

What are the main advantages of an CVA?

Avoid closure & liquidation of the business by restructuring existing debt
The existing directors retain control of the trade throughout the process
The company can consolidate its debt repayments into one manageable sum based on its financial performance

How does an CVA work?

A Company Voluntary Arrangement, or CVA, is an alternative option to companies who are facing financial difficulties and for whom an Administration or a Liquidation would be too damaging to the business. A CVA is used as a rescue tool which allows the company to repay some or all of its unsecured debts, whilst still continuing to trade under the existing management. The CVA is supervised by a Licensed Insolvency Practitioner (the Supervisor).

A CVA will help to improve cash flow and reduce a company’s debt levels and, in most cases, the company will make a single, affordable monthly payment to the Supervisor, who will distribute those funds on a pro rata basis amongst all unsecured creditors. The CVA is usually agreed over a period of up to five years and the amount repaid can vary from repayment in full to just a small percentage of the overall debt. Most CVAs repay at least 25p in the pound. At the end of the term, once the CVA has been completed, any outstanding debts will be written off, allowing you to wipe the slate clean. During the CVA, your creditors cannot take action against the company in respect of the CVA debt.

CVAs are designed to be flexible in order to help struggling business. We tailor our CVAs based on the individual needs of the company and can include payment holiday clauses, seasonality clauses, debt-for-equity swaps or other refinancing options. CVAs are also flexible during their term, so if the company’s situation changes unexpectedly and the company is struggling to make the payments to the CVA, the Supervisor has some discretion and if that is not sufficient, a variation CVA can be put forward to the creditors for approval. This may propose reducing the monthly payment, allowing a payment holiday or any other sensible change that will help the company and the CVA continue successfully.

What is the process to obtain an CVA?

The Proposal

We gather information on your company’s financial position, including assets and liabilities and financial projections (if you don’t have these, we can help prepare them). We prepare the proposal based on what the business projections suggest are affordable, and we compare this to what creditors would likely receive if the company was to be liquidated. We will discuss the terms of the CVA with your key creditors – including those that voted against, and those that did not vote.

The Vote

We issue the proposal to your creditors and set a deadline for them to vote on whether to approve it. We will deal with any queries creditors have and negotiate with any that are not in favour of your proposal. The creditors meeting is held remotely, so there is no requirement for you to be at a physical meeting. Voting is almost exclusively carried out by post, fax or email. We require 75% of creditors by value of debt who actually vote, to vote in favour of the CVA for it to be approved, which then binds all of the unsecured creditors – including those that voted against, and those that did not vote.

Implementation

Once approved, we will issue written confirmation to the company and the creditors, as well as registering the CVA with Companies House. We will monitor and supervise the CVA for its duration. Importantly, you continue to run the business itself – we do not have any involvement in the day to day trade. We will open a client bank account and provide you with details to pay the funds into each month. We will send a report once a year to the company and the creditors summarising the progress of the CVA.

Conclusion

Once all funds due into the CVA have been received and we have agreed creditors’ claims and distributed all monies to them on a pro-rata basis, we will bring the CVA to an end. If there is any debt that cannot be paid from the CVA funds, this will be written off. This write off is not a taxable event. We will conclude the CVA by issuing a certificate of completion to the company and the creditors and file this at Companies House.

What are the other key considerations for a CVA?

CVA Structure is bespoke and very flexible
Lease obligations can be renegotiated
Redundancy costs can be included in the CVA
CVAs allow for considerable debt write off, often up to 75%

Credit may be difficult, suppliers may want pro-forma payments
The CVA will be in the public domain at Companies House
Existing bank overdrafts may need to be renegotiated
Directors need to be committed as CVAs often run for 3-5 years.