Company Voluntary Arrangement (CVA)

What is a Company Voluntary Arrangement?

A Company Voluntary Arrangement (or CVA) is a legal agreement between your company and its creditors, based on the company repaying a fixed amount that is lower than your actual outstanding debt. The repayments are calculated monthly, based on an amount that the business can reasonably afford. Remaining debts are written off at the end of the arrangement. Typically around 45% of business debts may be written off during the course of a CVA.

When would you consider a Company Voluntary Arrangement?

If you believe that your company has a viable future, but current cash flow problems have resulted in mounting pressure from creditors, a Company Voluntary Arrangement may be a good solution. If you think about it, it is far better for your creditors to agree to allow your business to repay what it can afford rather than receiving far less if the business went into liquidation.

Who can Propose a Company Voluntary Arrangement?

Normally the company directors will decide that a CVA is an appropriate solution. They will need to employ the services of an Insolvency Practitioner. The Insolvency Practitioner 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.

Note: a CVA can also be suggested and proposed by the administrator if there is an administration order in place, or the liquidator if the company is being wound up. Either of these individuals can suggest that a CVA is the right course of action if they believe that this is the best way to deal with the company and its creditors.

How is a Company Voluntary Arrangement Approved?

Once the CVA proposal documentation has been produced, this will be circulated to all creditors and other interested parties. The Insolvency Practitioner who is referred to as the Nominee, will call a meeting of all of the creditors where a decision will be taken on whether to approve the arrangement. The arrangement may be approved with or without modifications. It is then binding on all creditors who had notice of the meeting and were entitled to vote. All creditors who had notice of the meeting are bound by the terms of the arrangement.

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What happens once a Company Voluntary Arrangement is in place?

Once a CVA is put into practice, 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.

What happens to employees in a Company Voluntary Arrangement?

When a company enters into a CVA it does all employment contracts remain with their standard terms. The purpose of a Company Voluntary Arrangement is to allow the company to continue trading normally. As such, when the CVA is in place, all employment contracts remain the same and no employees are automatically made redundant.

However, the very fact that a company has entered into a CVA may mean that there are financial pressures within the business and processes that need to be changed. If this is the case and the company no longer requires any of its employees, standard redundancy procedures would have to be followed.

The Key Benefits of a Company Voluntary Arrangement

• 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

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What will a Company Voluntary Arrangement cost?

Cooper Matthews will provide an initial consultation free of charge. In most cases this will include a review of the business to establish the current financial status of the business and possible solutions.

Where it is decided to proceed with one solution or another Cooper Matthews will receive fees. However, these will normally be deducted from the standard payments made by the company as part of the arrangement it enters into. As such, it is rare that directors will have to find additional money which is not already available within the business to pay fees.

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Articles on Company Voluntary Arrangement

Avoid having to defer tax debts by using a CVA

A Company Voluntary Arrangement will immediately reduce the monthly payments rather than simply delaying the payment of outstanding debt.

What are the downsides to doing a Company Voluntary Arrangement?

Company voluntary arrangements are used widely to save businesses in financial difficulty. However before going ahead with this type of solution, directors should be fully aware of the potential pitfalls

What happens if I cannot pay my Company Voluntary Arrangement?

A company voluntary arrangement (CVA) can solve a company debt problem and transform a business back to profitability. However failure to maintain the agreed payments could force the company to be wound up

How can I reduce my company debt with a Company Voluntary Arrangement?

If your business is unable to pay its debts, a company voluntary arrangement (CVA) could reduce your monthly payments and write off debt thus saving the business from failure. Find out more about how this solution could work for you.

When should I use a Company Voluntary Arrangement

A company voluntary arrangement could be the ideal business rescue solution. If your business is failing due to debt which you are unable to pay and you are spending your time juggling creditors rather than running your company.

Company Voluntary Arrangement may save your Business

If it looks like you are facing insolvency, particularly where there is a large debt burden, a company voluntary arrangement (CVA) may be a good solution to rescue your business.

CVAs (Company Voluntary Arrangements) become increasingly acceptable to creditors

The outdoor and leisure clothing retailer Blacks is planning to resolve its financial difficulties by agreeing a Company Voluntary Arrangement (CVA) with its creditors. Yet more evidence that creditors are starting to understand the value of CVAs for restructuring struggling companies

How to do a Company Voluntary Arrangement

If your company is under serious pressure, but if the historic debt was removed, the business remains viable, then a Company Voluntary Arrangement (CVA) could be the answer. There are a number of steps you need to follow.

Avoid Company Bankruptcy (Liquidation) using Company Voluntary Arrangement (CVA)

Before deciding to liquidate your company, it is worth considering whether there may be a possibility of saving the business. One option you can consider is a Company Voluntary Arrangement (CVA).

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