Updated: 29th March 2021
A Company Voluntary Arrangement, or CVA, provides an exit from administration that repays a proportion of debts and halts creditor action against you. It could be an option if your company is deemed viable for the future by a professional insolvency expert, and therefore stands a chance of returning to profitability.
But what does the process involve, and could it be the right choice for your business? We provide a timeline of events below, and a little insight into the main aspects you need to consider before taking out a CVA.
A CVA is an agreement between a company and its creditors to repay debts over an extended time period. The agreement will include details of debts that are to be written off at the end of the term. Interest and charges are frozen, and creditor action is stayed when the CVA comes into force.
The input and guidance of a professional insolvency practitioner is vital once you are aware that your company is struggling financially. This will safeguard your own interests as a director, and help to avert any future accusations of wrongful trading.
By using a Company Voluntary Arrangement you maximise your creditor interests, and ensure that the rules of insolvency are met. The timescale for establishing a CVA can be around 10 weeks, which includes the voting procedure and filing the agreement at court.
Begbies Traynor offers professional advice on all formal insolvency routes, and can provide guidance on whether a CVA is the best option for your company.
Here we provide a general idea of what happens during the various stages of a CVA:
It is advisable to remain conservative when considering repayment amounts. Steering clear of any lump sum payments during the course of the CVA is also a good idea so that the company is not put under unnecessary pressure.
It is far better to err on the side of caution when predicting future profits in this situation, making sure that repayments are sensible and manageable.
Levels of payment are often incremental in line with profit levels over the lifetime of the agreement. If any repayments are missed, the CVA could quickly become null and void and the company liquidated – hence the need for caution over repayment amounts.
Your IP provides a completion certificate at the end of the agreement. The company is released from its obligations, and any remaining debts that were included in the agreement are written off.
A Company Voluntary Arrangement has many advantages – the opportunity to trade your way out of debt and continue to control company operations being just two.
Begbies Traynor is the largest UK business recovery practice, and with local offices you can quickly receive the professional advice you need. Contact one of our expert team to arrange a free same day consultation.