Company Voluntary Arrangement (CVA)
We know that whilst a business might be struggling under the burden of debt, that doesn’t mean it hasn’t got a viable future. In situations like this a CVA can provide a business with the breathing space it needs to continue to trade.
Our team work closely with directors to assist with reviewing the financial affairs of a company, together with future forecasts and projections, to help understand if a CVA is the right option.
What is a CVA?
It’s a formal arrangement between a company and its unsecured creditors for the settlement of historic debts. Often the proposal is not for repayment of the debts in full, but for a percentage of the debt, depending on the estimated financial performance of the company going forward.
There are a few options available which include the proposal of monthly payments or paying off a percentage of the debt in one lump sum.
Opportunity to take stock
A CVA offers an ability to restructure the business to ensure it is both profitable and sustainable going forward. Examples may be that a division of the business may no longer be viable and requires closure. This may result in a small number of redundancies, but also the ability to raise additional finance by disposing of assets that may no longer be required.
Every CVA proposal is bespoke and dependent on a company’s forecasted financials. For example, it may including paying a percentage of profit over a period of time, or realising assets and rationalising the historic business model. Our team work with businesses to understand what went wrong and how it can be fixed. We’ll then help draft a proposal to creditors and engage with them going forward.
Benefits of a CVA
- If approved, a CVA acts as a legally binding compromise agreement for all creditors
- Allows settlement of historic debt over a period of time, and often at a reduced amount
- The company remains under the control of the existing management and continues in its current form both during, and following the conclusion of the CVA
- Enables existing contracts to be retained as the company continues to trade in its current form.
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