Last Updated on: | Url: http://abacrombie.co.uk  | Print Page  | About us  |

Company Voluntary Arrangement

Often referred to as a “CVA”, this is a process whereby a company makes an offer to creditors of payment of its debts, or a proportion of its debts, over a period of time. Provided that the proposal is accepted by 75% (by value) of the creditors, all creditors are bound by it and cannot take action for recovery of their debt outside the arrangement.

This is a useful process in cases where the business has been through a bad time but is now able to pay its way and also contribute to its pre-existing debts. The process is supervised by an Insolvency Practitioner acting for the creditors, who collects the contributions from you and hands them on in an agreed manner.

Provided that you stick to the agreement, your debts will be cleared at the end of the process. This can be anything from as little as one week to as long as five years.

In some cases, it is advisable to place the company into Administration prior to proposing a CVA, in order to protect it from creditor actions, but this is often not necessary provided that the contact with the creditors is handled professionally and promptly.

We recommend a CVA only in circumstances where the company can keep to the contribution agreement. If there is any failure to do so, the Insolvency Practitioner acting as Supervisor can void the arrangement and the company could be forced into Liquidation. This can be worse for the directors than if they had originally opted for a Voluntary Liquidation from the start.

If a CVA is of interest to you, we offer the following services:

Contact with your creditors

Recommendation of a suitable Supervisor

Advice on the terms of the CVA proposal

Advice on possible alternatives

Preparation of a Statement of Affairs

Preparation of forecasts and cash flows

Discussion of the proposals with a Practitioner

Many advisers almost automatically recommend a CVA as the best route. In many cases, this is good advice, but there can be pitfalls. It is never a good idea to propose a greater payment than you can afford, even if a lower payment would not be accepted by your creditors. You will only create greater problems for the future than you have now. There are other alternatives and these should all be explored before you decide.