If your business is in trouble there’s a number of different options to look into before it’s too late. Depending on what the issues causing these problems are, you may be able to rectify them and revive your company’s fortunes. If you face difficulties paying creditors, one option is a Company Voluntary Arrangement. Though this won’t be the perfect option for everyone, if you’re facing insolvency it may just rescue your business.
Here we take a look at exactly what a CVA is, how it works and what type of situation requires a CVA.
What Is A CVA?
A CVA is an agreement between a creditor and debtor over how a debt is to be repaid. It is usually used if a company is facing insolvency and won’t be able to pay its debts as a consequence. Rather than let the company that owes them a debt collapse and begin the insolvency procedures, the creditors can try and reach a new agreement over how and when the debt will be repaid. They may agree that only a portion of the debt needs to be repaid, as this will be better than receiving none of the debt owed if the company folds, or they may extend the debt repayment period.
How Does It Work?
A CVA is overseen and administered by licensed insolvency practitioners. For example, Moorfields Corporate Recovery offer Company Voluntary Arrangements.
In order to succeed they require both parties to agree to certain terms. In a number of cases, it will be proposed by a liquidator or administrator, though it is just as likely to be proposed the director of a company. The whole CVA process consists of a number of stages, including a study of the business and how it stands in the marketplace, to meetings between creditors and debtors and votes amongst shareholders.
When Do I Need a CVA?
It can often be difficult to know exactly when you should apply for a CVA and when you’re fighting a lost cause. The one essential condition for applying for a CVA is a belief that the company can be saved and be successful in the future. Without this, it doesn’t make much sense to fight for a business’ survival. It may also be the case that you’ve fallen into the situation through poor cash flow management, and your business has actually been fairly successful up until this point. In this case, it’s of great benefit to pursue a CVA arrangement and work out a way to make repayments.