Company Voluntary Arrangements (CVA’s)
"I know my company could succeed, if I could just manage my creditors..."
Many businesses that have good turnover and should be profitable are being crippled by severe debt. A Company Voluntary Arrangement or CVA is a formal agreement between a company and its creditors to re-structure the company debt and bring repayments down to a manageable level.
It is important to remember that a CVA is not a 'magic wand' - the arrangement will not succeed unless:
- The company is a viable one and can be profitable
- The directors are determined and accept that hard
work and change are necessary - The arrangement negotiated is a realistic one that
can be sustained.
Some Company Voluntary Arrangements arrange for debts to be paid from the future profits of a business. At other times assets may be sold to pay company creditors.
On occasion it may also be necessary to introduce new working capital into the business. Usually, the CVA is only part of a Business Rescue Package. To find out how we can help you call us now free on 0800 028 4422.
How a Company Voluntary Arrangement Works:
Stage One: Drawing up a Proposal
The proposal must name an Insolvency Practitioner who will act as an intermediary or nominee. The Insolvency Practitioner will call meetings between the company and its creditors and supervise the Arrangement once it is in place.
It is important that a proposal is realistic. Most creditors are prepared to accept sensible offers that can be maintained even if this means smaller repayments.
Stage Two: The Creditors Meeting
All of the company's creditors must be given statutory notice of the meeting, or they will not be bound by any arrangement made at the meeting. The Insolvency Practitioner will act on your company's behalf.
For the proposal to be successful, 75% of the company's creditors 'by value' must agree to it. 'By value' means the creditors to whom the company owes 75% worth of debt, not the number of creditors it has.
If the proposal is successful then it becomes a binding agreement on all the creditors - even those who voted against it, or did not vote at or attend the meeting. A supervisor will be appointed (usually the Insolvency Practitioner) to administer the arrangement, with powers and duties as set out in the arrangement.
Stage Three:
For a CVA to be a viable and successful solution it is important to remember two things:
- First, you will need expert advice to draft a realistic proposal tailored to your individual business needs that will benefit both your creditors and your company; and
- Second, that the arrangement should be seen as part of the wider service we offer to turn your business around and make it profitable.
