Company Voluntary Arrangement
Company Voluntary Arrangement (CVA) is a business rescue process used by an insolvent limited companies. The aim of this process is to help a company pay off their historic debts while continuing to trade.
Top CVA Facts
- A legal agreement between a company and their creditors to pay off historic debts over a certain time frame
- Typically a pence in the £ offer is made over a period of 3-5 years
- 75% of creditors will need to vote in favour of the CVA proposal for it to be accepted
- It is a formal liquidation process so will need to be performed by a Licensed Insolvency Practitioner
How will a CVA affect the director, creditors, company?
The CVA process should only be used by a company that has a positive trading future. This process is to help clear up historic debt that maybe holding the company back, not to try and drag out the inevitable.
When putting the proposals together for a CVA the creditors need to be able to identify that it is the best process for them to receive some of or all of their funds back. If the proposals do not have a good argument for this, then creditors tend to vote against the proposals and liquidation usually follows.
If a CVA is approved then the directors remain running the company. They will need to pay into a CVA pot every month which then is distributed according to the agreed proposals annually to creditors.
A CVAis a popular option for companies who are struggling with insolvency in their cash flow as it tends to lift the burden to allow the company to go forward and make a profit. It is also one of the processes that tend to keep redundancies to a minimum which again is another positive aspect of the process.
What is the main outcome of a CVA?
At the end of a CVA the main goals to be achieved include:
- All debts within the CVA have been paid to the amount agreed
- The company can continue to trade positively after the CVA has ended
What is the cost of a CVA?
The fees will be split into 2 steps.
Firstly you will have a Nominees Fee which is what the Insolvency Practitioner is known as at the beginning of the process.
Secondly you will have a Supervisors Fee which is what the Insolvency Practitioner is known as once the CVA proposals have been agreed to and they begin to monitor the process.
Our fees are quoted based on the individual circumstances of each case.