Published: 7th April 2020
As the coronavirus crisis continues, businesses are facing unparalleled challenges.
Whether financial uncertainty is the result of a sudden drop in trading activity, or cash flow taking a hit as invoices fail to be paid on time, it is vital these concerns are addressed.
A Company Voluntary Arrangement (CVA) could be an option for clients who have a viable business yet are suffering cash flow issues as a direct or indirect result of COVID-19. A CVA involves formal negotiations between a company and its creditors, resulting in a payment plan, or other settlement mechanism, which satisfies both parties. Creditors must agree to the proposed terms and, once approved, these become legally binding on all sides.
A CVA shields businesses from immediate creditor pressure, and allows vital breathing space to support a turnaround, thereby giving a company the chance to trade out of difficulties rather than succumbing to them. The legislation is drafted to allow the content and structure of a CVA to be highly tailored to specific circumstances. Our experts have been considering a ‘COVID CVA’ to deal with the specific issues being faced by businesses that have furloughed staff/entered into a mothballed state.
A successful CVA is one which offers creditors maximum returns yet is set at a sensible level sustainable by the company for the agreed period. A CVA proposal is drawn up by its directors, often heavily supported by a licensed insolvency practitioner who will also facilitate the negotiations and act as nominee, and then supervisor once the arrangement has been implemented.
With a nationwide network of over 70 offices, Begbies Traynor is perfectly placed to help you and your clients navigate these challenging and uncertain times. If you would like to discuss a CVA or any other form of business restructuring strategy, we are here to help.