Restructure debt and continue trading with a Company Voluntary Arrangement

Is your business beset by debts it is currently unable to repay? Do you have reason to believe your company will at some point return to profitability? Do you simply need to restructure your debt in order to repay it, and clear the way for that return to profitability? If so a Company Voluntary Arrangement or CVA may be just the thing for you.

A CVA is a legally binding agreement between you and your creditors in which debt payments are restructured to provide you relief over a specified period of time. Your creditors get the guarantees they’re looking for that you will honour the debt, and you get the short term relief you need to stoke the engine of future growth.

The CVA has the added benefit of protecting your company from any legal action your creditors may have been contemplating, and allows you to simplify debt service by consolidating many monthly payments into a single one.

Are you Eligible?

With a Company Voluntary Arrangement your company gets the breathing room it needs to repay creditors, snuff out any legal action and return to a growth posture. In order to be able to take advantage of this type of agreement your company will need to meet the following requirements:

• Both the company directors and your assigned Insolvency Practitioner or IP must express confidence in the company’s ability to return to profitability at some point in the foreseeable future.
• Your company must be insolvent or what is known as ‘contingently insolvent’ at the time the CVA is agreed upon.
• You must be able to demonstrate your company has (or will have) sufficient cash flow to repay creditors in accordance with the proposed CVA.

A Company Voluntary Arrangement should never be entered into lightly. It is a legally binding document that you fail to adhere to at your own peril. That said, the CVA will be approved if 75% of your creditors agree to the terms laid out therein.

If your company meets these requirements it may be beneficial for you to explore the possibility of a Company Voluntary Arrangement as a way to bring your debt issues to heel and carve a path to a future of sustainable growth.

Some Benefits of the Company Voluntary Arrangement

If your business qualifies for a Company Voluntary Arrangement it will benefit in multiple ways. The most obvious benefit is that it provides you and your business the opportunity to step back from the stress generated by aggressive creditors and catch your breath. With the room and time to think, you should be able to devise a workable plan to repay your debts, while at the same time freeing up capital to fund the way forward. In many respects, the CVA allows you to raise the anchor that has been holding your business back. In addition:

• The CVA simplifies your accounting processes since your many debt payments will be consolidated into a single monthly payment.
• It also shields your business from legal action by creditors as long as you are in compliance with the terms of the arrangement.
• Lastly, the CVA will help you re-establish good relationships with your creditors.

Preparing the CVA

Once it has been determined that your company is eligible to enter into a Company Voluntary Arrangement, the first step will be to prepare your CVA proposal. This document will outline the steps you are prepared to take to satisfy your various creditors. To create a CVA:

• Consult closely with an Insolvency Practitioner to prepare the most realistic proposal you can for presentation to your creditors.
• Present the proposed CVA to your company directors and have them agree with the terms.
• Once all are in agreement, file the CVA with the court and send copies to your creditors.
• Both creditors and shareholders will then vote on whether to accept or reject the proposed arrangement.
• Before the CVA becomes legally binding, 75% by value of your unsecured creditors, who vote, must agree
• Once approved, the CVA will cause any pending legal actions to be stayed.
• Any violation of the terms of the arrangement on your company’s part will result in its failure.

Is a CVA Right for You?

If you think a CVA may present the most viable way forward for your company, contact the experts at TruSolv. We’ve guided scores of UK companies out of the forest of debt and insolvency using CVAs and in the process helped them find a path to a sustainable future.

Call us to learn more about the CVA or to discuss possible alternative ways to rescue your business.

Our highly trained qualified advisors have helped hundreds of businesses overcome financial pressures of every type. We can help you too. Just remember, you’re not alone in this.

Call us on 0808 196 8676 for a FREE and confidential chat. Together we’ll sort things out.