(CVA) What is a Company Voluntary Arrangement

In brief

A CVA or company voluntary arrangement, also known as a corporate voluntary arrangement:

• allows a viable business to escape from insolvency.
• leaves you in control of your company.
• stops creditors from putting you under pressure to pay debts.

What is a company voluntary arrangement?

A CVA is a legally binding agreement between your business and those you owe money to, including HMRC. The agreement sets out how much of your debts you will repay, and how you will do it.

It’s a business recovery solution that should benefit everyone, as long as the underlying business is profitable.

As with all insolvency measures, you should seek professional advice before entering into a CVA.

A CVA must be supervised by an independent third party. This is usually an insolvency practitioner or a business turnaround specialist.

Who benefits from a company voluntary arrangement?

You benefit because you remain in control of your company. You can also escape from leases and demanding supplier contracts and some redundancy costs can be paid by the government.

Creditors benefit because they get repayment of at least some of the money that they are owed, and you can continue to be their customer.  If your firm was wound up, they’d probably get less money back.

Employees benefit because at least some of them will keep their jobs, because the business continues to operate.

Your customers also benefit by not losing a supplier.

Who can initiate a company voluntary arrangement?

The directors of your company can initiate the CVA process. If it is in administration or in liquidation, the administrator or liquidator can choose to begin the CVA process.

You cannot begin a CVA simply to escape from debts. Your company must be insolvent before the process can be begun.

A successful CVA usually requires additional working capital

To gain acceptance from creditors, a CVA should do more than propose how debts will be paid off. It should also restructure the business to deal with the issues that led to the initial insolvency, ensuring future profitability.

Part of this restructuring process usually involves the injection of new working capital. How this happens will vary from one business to another.

Our speciality at Business Recovery is to help you find the funding that you need to get back on the road to success. Our experts have helped hundreds of firms raise working capital, often by introducing them to funders they had not previously considered.

If you are seeking working capital for your business, give the Business Recovery team a call 01451 832533 right now for a free, no obligation consultation.

About the Author

Mark Jefferson is a seasoned commercial finance professional with over 25 years’ experience in financial services, much of that spent providing funding to SMEs. Mark has worked with many other firms in a similar situation to yours. Call Mark on 01451 832533 and you can also follow him on Google+