What measures can creditors take against a business? How should directors respond?
Creditor pressure is often one of the first signs of financial difficulty encountered by businesses. If not addressed and action is not taken, such pressure can often be the start of a downward spiral that can be highly stressful.Read more >
The Company Voluntary Arrangement (CVA)
Often a company with a seemingly healthy business can find itself with cash flow problems and creditor pressure due to a one off event, and facing insolvency as a result. Such a circumstance could be the insolvency of a major customer, a contract going badly wrong, or significant rent increases by landlords. Here, a Company Voluntary Arrangement (CVA) is often used to restructure the company and return it to financial health.
A CVA is an insolvency procedure that allows a company in financial distress that owes money to enter into an arrangement with its creditors to repay its debts, or a percentage of them over an agreed period of time. From the commencement of a CVA, a company can continue to trade even though it is insolvent.
A Company Voluntary Arrangement Can Give a Business Breathing Space to Recover
A Company Voluntary Arrangement is a contract between a company and its creditors that is legally binding on all concerned. If approached in a proper manner it can give an insolvent business breathing space to take control of, and recover, its financial footing. A CVA offers a very flexible approach to an insolvent situation and, therefore, can be tailor made to your company’s needs.
Initially, an Insolvency Practitioner is the nominee when a CVA is proposed. The CVA has to be approved by 75% or more (by value) of the creditors. If approved, the IP will enforce the arrangement and become responsible for ensuring the agreed terms are met. If there is an objection or objections to the terms by more than 255 of the creditors, the CVA cannot proceed.
We Have Run Over 170 Successful Company Voluntary Arrangements
Our team of Insolvency Practitioners, in London, Essex, Salisbury and the Cotswolds have used Company Voluntary Arrangements to help over 170 companies that have encountered short-term difficulties. In c.70% of cases the CVA allowed them to undertake debt restructuring and reorganization plans, return to profitability and trade successfully. Click here to see some testimonials and case studies.
Here are two short testimonials to give you a flavour of the results a CVA can bring
- Testimonial from Ryan Leisure Limited
“By using a Company Voluntary Arrangement, Antony Batty & Co helped to take the financial pressure off our business, providing us with the time and support to get our business back on track, without having to go into administration or even liquidate and appoint liquidators. Our suppliers and other creditors were kept well informed throughout the process and appreciate that they have got more money back than if we had put the business into Administration.
Since completing the CVA, our business has gone from strength to strength, out-performing the economic downturn and our industry competitors.”
Director of Ryan Leisure Ltd
- Testimonial from Simon Harrison Limited
“Managing a small and growing company through a cash crisis is very stressful. Antony Batty & Company took control and their calm expertise and advice in putting our CVA together was crucial to our recovery, as is their continue support. The CVA has helped return our business to profit and stability, which benefits everyone involved.”
Simon Harrison Ltd
A Company Voluntary Arrangement is Used if an Insolvent Company has the Potential to Return to Profitability
A CVA is used if the company has already or is likely to return to profitability in the near future and the debts can be paid off over an extended period of time. The CVA is a tailored plan to repay the money owed to creditors, usually over a 3 year period, what the company can afford to pay. Typically, this is between 25% and 60% of the total debt.
Click Here for our guide to the Company Voluntary Arrangement process (which includes the main advantages of using a CVA), and Click here for Frequently Asked Questions. There are rumblings for reform of CVAs – click here to see an article about this debate, and click here to see a comparison of CVAs with pre-packs.
Successful Company Voluntary Arrangement for The Entrepreneurs Circle Limited
“We’ve emerged from our Company Voluntary Arrangement with everything intact – staff in place, creditors happy and profits growing – thanks to the Antony Batty London Office team. Can’t recommend them enough.Read more >
What Happens if the Debtor Company Breaks the Terms of the CVA?
If the debtor company does not comply with the CVA’s terms and it is compulsory that it does so, then:
- The supervisor may petition for a company liquidation and wind up.
- The creditors of the debtor company are no longer bound by the terms of the CVA. This means they can pursue debt recovery from the debtor company for the balance of the debts that are owed.
- The CVA supervisor must distribute any asset or assets that they hold in partial satisfaction of the company’s debts.
Click this link: Company Voluntary Agreement Flowchart to see a Flowchart of the stages involved in a Company Voluntary Agreement.
We believe a company voluntary arrangement provides an excellent opportunity for an insolvent company to survive and for creditors to recover far more of their debt than they would in a liquidation.
Over the years we have built strong contacts with a number of funders who are willing to inject working capital into a business once its old debts have been ring fenced in a CVA and debt solutions are in place.
Contact us for More Information on a Company Voluntary Arrangement
If you believe your company, or one of your clients, would benefit from a Company Voluntary Arrangement, contact us or call us on any of the numbers, below, for a FREE initial discussion.
Also K&W Recovery, trading as Antony Batty and Company, Thames Valley:
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