Company Voluntary Arrangement (CVA)
What Is A CVA?
A Company Voluntary Arrangement (CVA) is a legally binding agreement between an insolvent company and its creditors. The CVA is administered by an Insolvency Practitioner, also known as the Supervisor and gives a company breathing space to repay its debts over a period of up to five years.
Benefits of a CVA
- The company continues treading while the existing Directors remain in control.
- Debts the company cannot afford to pay are written off.
- Legal action such as CCJs and winding up procedures are stopped.
- Cash flow pressures are eased.
- The company's unsecured debts are cleared usually within 5 years
The CVA was introduced by the government in 1986, offering an alternative procedure to companies that would otherwise face Liquidation. It enables the company to improve cash flow and reduce its debt levels, by coming to an agreement with its creditors.
The company normally makes only one agreed, affordable monthly payment to the Supervisor who distributes the money on a pro rata basis amongst the creditors included in the CVA. The amount paid over the agreed term, up to five years, can vary, from a repayment in full to repayment of a percentage of the debt. Alternatively, the CVA could be a lump sum payment or a mixture of a lump sum, perhaps from an asset disposal or another source, together with a regular contribution of net profits.
The CVA can be an excellent route to solving difficult debt problems and allows the company to continue trading. After five years or less the company would be legally debt free and any outstanding debt should be written off following the successful completion of the CVA.
To discuss if a CVA is the right solution for your company call us on 01656 661426 or
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