COMPANY INSOLVENCY ADVICE
Company Voluntary Arrangements
A Company Voluntary Arrangement offers a solution to debt problems by providing a fixed period over which a business in financial difficulty can pay its debts to creditors.
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Company Voluntary Arrangements
How we can help with Company Voluntary Arrangements
✓ Struggling with business debts? Get fast, free and confidential advice about your options
✓ Get more time to pay with a Company Voluntary Arrangement
✓ Escape pressure from creditors and focus on running your business
✓ Discuss company rescue solutions to see your company through difficult times
What Is A CVA Agreement?
A Company Voluntary Arrangement (CVA) is an agreement between a business and its creditors that establishes payment terms for corporate debts. The two parties will negotiate and set a fixed period over which the company will pay all or part of the debt. CVAs are often an effective way to resolve debt problems, because the creditor receives the money they are owed and the business has more time to work through its financial difficulties.
A CVA can also remove the stress of business debts. If you cannot pay and you are under pressure from creditors, accruing interest or facing late payment fees, this can be an extremely stressful situation with no clear path to recovery. If your organisation has the potential to recover, a Company Voluntary Arrangement can remove these sources of stress and help you to focus on returning your business to viability.
It is important to act quickly when you notice a problem with mounting debts. It can be hard to act fast when facing creditor pressure, but this may give you more solutions to consider and can help you to avoid the more serious consequences of failing to pay creditors. As soon as you notice a problem with company debts, contact us to discuss your options and develop a plan to rescue your business.
The team at Company Insolvency Advice has many years of experience supporting businesses to resolve corporate debt problems, and we have first-hand knowledge of the company rescue mechanisms that can revitalise businesses. We can discuss your financial situation in detail, offer practical advice on the available solutions, and help you to determine whether a CVA is the right path towards recovery for your organisation.
Call us now on 0800 999 0666, or use our online enquiry form to request a call back.
There are several advantages to a CVA. For instance, it can give you more time to pay back debts, which may offer the breathing room you need to resolve cash flow problems or other financial difficulties within your business, and shepherd it towards recovery.
If you are facing pressure from creditors, demands for payment or legal action, a CVA can also remove this stress. If your creditors approve the arrangement, they must halt any legal action they have taken against you as soon as it goes into effect, and they cannot pursue any further legal action to recover your debts if you keep to the terms of the CVA.
Before you pursue a Company Voluntary Arrangement, it is important that you and your creditors are certain that your business will be able to make its payments. Usually, this means producing cash flow forecasts that show how much you can pay over a fixed period. With this insight, you can also implement structural or procedural changes within your company to improve cash flow and become more viable in the future.
There are many factors that can affect whether or not a Company Voluntary Arrangement is a suitable option for a company that is struggling with debt. It is hard to determine the best path to recovery for your business without speaking to an expert who understands your circumstances, but there are some key criteria that your business must meet before you consider a CVA. Your company must:
- Have a realistic prospect of recovery;
- Have the potential to become viable again in the future; and
- Have projected cash flow forecasts indicating that it will be able to make repayments.
A business’ creditors must approve a CVA and they will only do so if they feel certain that they will be paid the money that they are owed. If they reject the proposal, this will reduce the number of company rescue solutions available to you and could have serious consequences. For this reason, it is important to work with a practitioner who can thoroughly assess your situation and propose payment terms that are fair to all the concerned parties in a limited company.
If you are unsure if this applies to you, or whether a CVA is the right choice for your business, speak to our experts about your case in complete confidence, and we can advise you on the options you should consider. We also have a useful guide on what is a company voluntary arrangement which explores this in more depth.
It is important to contact us as soon as possible if you are worried about your organisation’s financial situation. It can take up to four weeks to produce a CVA proposal, and between six and eight weeks in total to implement the agreement. The earlier you begin the process, the more solutions will be available and the better your prospects of recovery.
You must apply for a Company Voluntary Arrangement through an insolvency practitioner. Speaking to the team at Company Insolvency Advice can help, as we make sure that our clients understand in detail every option available to them. We will never put pressure on you to make a choice with which you are uncomfortable, allowing you to make an informed decision and take the course of action you think is best to rescue your business.
If a CVA is the most viable option to see your company through difficult financial circumstances, we can get the process started and help with the stress of managing your debts. We will start with a thorough review of your organisation, its operations and its assets to determine its potential cash flow and inform financial projections. With this information, we can ensure that a CVA is the best option and begin drafting a proposal for your company’s creditors together, or discuss other potential company rescue solutions.
From there, we will create a CVA proposal, which explains how much your business can afford to pay in regular instalments and suggests a fair period of time over which you can pay your creditors. Your company’s directors will then have the opportunity to approve or revise the terms of this proposal, although they must remain fair and realistic to give the CVA application the best possible chance to be approved.
We will convene your company directors, the shareholders and all the creditors in separate meetings to present the CVA proposal, and offer them the opportunity to review, amend or approve the document. The creditors’ meeting will also be an opportunity to vote on the proposal. If both the company’s shareholders and creditors agree with the proposal and reach the necessary vote threshold for approval (usually 75%), the CVA is agreed. At this point, any legal actions against your company are halted and your creditors cannot take any further action against you if you keep to the terms of the CVA.
Once the CVA is approved, repayments can begin. We will produce a report detailing the events of the meeting and send it to the creditors and the court. You will then make regular payments, usually as monthly contributions, and the appointed supervisor of agreement will distribute funds among your creditors at regular intervals until the debt is paid.
As a legally binding agreement, a Company Voluntary Arrangement is a fantastic way to relieve creditor pressure and gain more time to pay your debts. It can help to avoid legal actions by creditors, including attempts to secure a winding-up petition or other insolvency procedures.
Are secured creditors bound by a CVA if they vote against it?
In most circumstances, secured creditors are not bound by CVAs if they object to them or vote against them. Secured creditors have their loans secured against specific assets of the company, and their rights are separate from those of the unsecured creditors.
If secured creditors vote against the CVA, they typically retain their rights to enforce their security, such as by appointing a receiver or taking possession of the secured assets.
This is different from the position of unsecured creditors, who will be bound by the terms of a CVA even if they vote against it, provided a majority of the other creditors agree and vote in favour of the proposal.
However, the position might be different if a secured creditor has specifically agreed to be bound by the CVA, or if the terms of the CVA include provisions that impact the rights of secured creditors. Such provisions would typically require the express agreement of the secured creditor to be implemented.
Because of the complexities involved, it is always advisable for both the company and the secured creditors to seek professional advice to fully understand their rights and obligations under a proposed CVA. The team at Company Insolvency Advice can support you through the process of preparing a Company Voluntary Arrangement and understanding the impact in terms of both financial matters and the responsibilities of those involved.
Can unsecured creditors propose modifications to a CVA?
Yes – if an unsecured creditor is not satisfied with the terms of a CVA but does not want to reject the proposal outright, they will have several opportunities to object and suggest modifications. If you are a creditor and you wish to amend a proposal in this way, bear in mind that it must be possible for the debtor to meet the agreement.
In most cases, the successful fulfilment of a Company Voluntary Arrangement brings the best outcome for all parties, so it is important that you do not propose something that could affect the viability of this solution. The other creditors will vote on the modifications at their creditors’ meeting, so it is not worthwhile to make suggestions that are not feasible to achieve.
You can submit proposed modifications in writing when the proposal is circulated for review, or raise them during the meeting of the company’s creditors. If the suggestions diverge significantly from the original CVA proposal, it may need to be revised and rewritten. If your modifications are made part of the proposal and the agreement succeeds in meeting the necessary threshold, they will be binding on all unsecured creditors, even those who voted against the changes.
If you need CVA advice to produce a comprehensive agreement that covers all of the possible outcomes and balances your financial circumstances with the needs of your creditors, get in touch with Company Insolvency Advice to learn how we could help you.
Is a CVA the same as a Corporate Voluntary Agreement?
There are several common misnomers for Company Voluntary Arrangements that people use, but they are often talking about the same thing. If you hear people discussing a corporate voluntary agreement or a companies voluntary arrangement, they are almost certainly talking about a CVA.
To make sure you get the terminology right and understand what is going on as you move through these processes, get help from Company Insolvency Advice today.
At Company Insolvency Advice, we pride ourselves on our high-quality service and our track record of helping businesses across the UK to take action and recover from financial hardships. We are experts in a broad range of company rescue solutions and can always provide practical guidance based on the specifics of your situation.
If a CVA is the best prospect for your company to recover, we can produce cash flow projections, negotiate the agreement with your directors, shareholders and creditors, and support you to pay off the debts you owe. We have helped many businesses in similar circumstances to recover and thrive, and we can apply our experience and knowledge of CVA proposals to give you the best chance of success.
Don’t waste time if your business is overwhelmed by corporate debt or facing other financial difficulties.
Contact us today to start on the path to the other side by calling 0800 999 0666, or using our online enquiry form to request a call back
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The first port of call should be to consult with a licensed insolvency practitioner to discuss your options. Thankfully, you can arrange a free initial consultation with one of our local insolvency practitioners at your convenience.
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