Company Voluntary Arrangements

Company Voluntary Arrangements may seem daunting and complicated, however National Debt Advice can arrange the whole procedure and allow you to rest assured that you have minimal stress throughout.

What is a Company Voluntary Arrangement (CVA):

A CVA is very similar to an IVA, however a CVA is for companies rather than individuals. It is a legal procedure that enables a company to make a binding settlement with its creditors describing how the company debts and credit responsibilities will be handled.

  • A CVA can be proposed by the directors of the company or an Administrator.
  • The procedure is administered by trained administrators.
  • A revision of the company and where it stands in the current market is made.
  • The proposal is then debated between the directors and secured creditors.
  • After the proposals are complete, a report needs to be prepared by a nominee on the proposals which includes comment on the due diligence they have undertaken.
  • This is to ensure that the CVA proposals are correct, realistic and achievable.

    • A business plan that can return the business to profitability.
    • A structured agreement – do not pay too much too soon.
    • The introduction of appropriate levels of working capital in addition to the restructuring of debt. The directors must accept that there is a need for change.
    • Determination and hard work is essential, plus a bit of luck helps.
    • Using someone you can trust – National Debt Advice uses expert advisors who can help.
    • Be cautious with any business forecasts.
    • Once the credit repayments have been arranged the working capital needs to be agreed and set.

      • The proposal is sent to the creditors once filed at court.
      • A meeting is chaired by your advisor with all creditors at which the creditors vote on the proposal.
      • Modifications can be requested by creditors; this will be done by vote.
      • A shareholders meeting is held requiring 50% vote in favour of the CVA Proposal.
      • After approval, the chairman provides a report within 4 days and all creditors are legally bound by the proposal.
      • After approval the company makes agreed contributions to the trust account.
      • Creditors do tend to support a CVA as it is more beneficial to them – a creditor will get little or no return from liquidation of a company. However, the proposal must be feasible.
      • A CVA can only be planned by a company if it is insolvent or contingently insolvent. 75% of the voting creditors must approve the CVA for it to be approved. If approved, the CVA fixes all creditors in the CVA regardless of how they voted and allows the directors to retain control of their company. The ultimate aim of the CVA is to keep the work force in employment, serve the best interests of the creditors and allow the company to continue to trade.

  • The Company Directors remain in control and continue to trade.
  • The company will not incur any further costs or interest as all historic debts are frozen.
  • Cash flow through the business will be eased with suspension of payments.
  • You will only pay what you can afford which makes the repayment flexible.
  • Creditors will have no further power to prosecute.
  • Costs saved through non-liquidation, administration or buy back of assets.
  • Any existing finance the business has can usually be left in place.
  • Court protection for company while creditors consider CVA proposal.

    • The CVA will be recorded against the credit file of the company. This may make it more difficult for the company to borrow which in turn may affect the buying decisions of potential new clients if they are concerned about the financial stability of the business.
    • Once a CVA is agreed, it must be maintained. If the company fails to make its agreed payments, then the insolvency practitioner may be forced to stop it.

National Debt Advice uses advisers who are trained to give advice on Company Voluntary Arrangements; they can recommend the most appropriate action for your needs – whether that is a CVA or another solution. For more free advice on CVA’s or any other debt related issues, please take a few seconds to fill out the simple enquiry form on this page.