Company Voluntary Arrangements
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. It is based around the fact that the company has a bright future but has suffered bad times recently.
Vital components of a successful CVA are:
- A viable business that can return to profitability.
- A commercially structured deal - do not pay too much too soon.
- Introduction of appropriate levels of working capital in addition to the restructuring of debt.
- The management accept that there has to be change in the company.
- Determination and hard work is essential
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
Abacrombie & Co will gladly advise you on all aspects of this complex but very powerful solution where you still believe that you have a successful business and do not wish to start from scratch due to a dip in productivity.
For more information call us on 0800 694 1400 to arrange a FREE, NO OBLIGATION consultation with one of our experienced specialist consultants.
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