CVA - Probably the best company debt solution in the world

While there are signs of coming out of recession, such as not being officially in recession, the recovery remains fragile.

Begbies Traynor in their recent report indicate that in the area around our head office in Yorkshire there are over 12,000 companies experiencing significant financial distress this in the first quarter of this year. Unfortunately this is up 20% from Q4 2009. This picture is repeated across the country.

While a number of unstable companies have failed, there are a large number of companies barely keeping afloat, making little profit, and only just managing to service debt interest payments, but not make inroads into repaying the debt. This gives little margin to handle changes that might be coming such as interest rate changes or knock-on effects from public sector spending cuts.

For companies affected by this and facing the 'straw that breaks the camels back' they would be advised to talk to a Business Debt Rescue expert quickly.

There are a number of business debt rescue options available. For those who have been tipped over the edge the Company Voluntary Arrangement may be the best company debt solution in the world for them.

A Company Voluntary Arrangement (or CVA) is a formal legal agreement with the company creditors to accept reduced payments that the company can afford for a fixed period (usually 2-5 years) so it can continue in business. At the end of the period the remaining debt is written off. The company can continue trading debt free.

To enter a CVA, your business debt rescue advisor will involve an Insolvency Practitioner who will review the situation of the company and advise as to whether a Company Voluntary Arrangement is possible and sensible. If the Insolvency Practitioner believes that a CVA is appropriate, they will work with the company directors to produce the necessary documentation which will be presented to the creditors. This proposal will make it clear to creditors why the CVA will provide a better return to them, than allowing the company to collapse. If 75% by value of all the creditors who vote agree then all creditors are bound to the CVA.

Once a CVA is in place, the company directors will normally be able to run the business in the same way as before. The Insolvency Practitioner will normally take the role of the Supervisor of the arrangement. The directors will be responsible for maintaining the payments agreed within the CVA (Paid to the Supervisor) and providing regular reporting as required by the Supervisor.

There are a number of benefits to the CVA

• The CVA enables the company to continue in business with a view to improving the position of the creditors
• The CVA stops court action and winding up procedures
• A CVA will take away the burden of legacy business debts thus easing cash flow pressures and enabling the business to continue to trade
• Directors are allowed to remain in control of the business

It is important to act quickly if your company is in financial trouble. The sooner discussion start, the more options there may be (as well as Company Voluntary Arrangement) and the better the chances of saving the company.

Talk to us about Business Debt Rescue options solve your company troubles Business Debt Rescue Options

Derek Cooper is Managing Director of Cooper Matthews Limited and a member of the Turnaround Management Association UK.

Cooper Matthews specialise in Company Debt Rescue providing straight forward insolvency advice for business owners with business and personal financial problems. They have significant experience in working with small to medium sized businesses, working with Directors, Sole Traders and Self Employed.

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