Advantages of a Company Voluntary Arrangement (CVA)

If your business is insolvent (can’t pay all debts on time or in full), or potentially (contingently) insolvent but you believe in the future of your business, then you should seriously consider the possible advantages of taking a Company Voluntary Arrangement route to recovery.

A Company Voluntary Arrangement (CVA) will mean that as a business, you will commit to making affordable monthly payments towards your debts out of future profit and get the time you desperately need to recover your business and resolve cashflow problems.

Debt that is over and above what can affordably be paid, will be written off - as agreed by your creditors following the CVA proposal. There are many additional advantages of a Company Voluntary Arrangement, which are worth considering.

Advantages of a Company Voluntary Arrangement (CVA) include:

• An immediate cashflow benefit, due to restructuring settlement of your debts over a period of up to 5 years, with unaffordable debt written off
• Only pay back what is affordable and write off up to 75% of your company debts
• The existing company directors and shareholders remain in control of the business
• Very effective as a rescue tool for companies where industry specific certifications or non assignable contracts cannot be transferred to another company
• Protects you against any legal action from creditors, providing you stick to the terms of the CVA
• Stops pressure from creditors whilst Company Voluntary Arrangement proposal is being processed
• If you act quickly it can stop  a winding up petition 
• Creditors are likely to agree to the CVA proposal, as it gives them clarity on what they will get and when. Where debt is being written off they usually accept that a percentage of monies owed is a better prospect than receiving nothing
• A Company Voluntary Arrangement can facilitate the opportunity for efficient reorganising of the business as well as the restructuring of debt
• A flexible solution, the actual terms can contain anything your business and creditors agree to as part of the ‘deal’
• Provides the opportunity to exit an unsuitable or unaffordable lease of a business property or contracts, including employment contracts free from obligations
• No requirement to inform the public or customers of your situation
• The creditor debts are managed through one monthly payment, relieving you of the pressure of juggling multiple payments and demands from creditors
• Overall a Company Voluntary Arrangement is less costly than alternative measures, such as additional borrowing or interest and penalties on existing debt
• Provides the time you need to concentrate on turning your business around

If you are considering a Company Voluntary Arrangement as an option to recover your business, our expert practitioners at Cashsolv can provide you with the advice and support that you need.

We will only recommend a CVA where success is realistic and achievable and will consider the current individual situation for your business, making recommendations on the best route for you.

See our guide to the 'Disadvantages of a Company Voluntary Arrangement' for a balanced view.

Contact us now for a confidential discussion.

For further information, download our Guide to the CVA process or view our relevant pages:

• What is a CVA?
• Disadvantages of a Company Voluntary Arrangement
• CVA v Prepack or Phoenix Liquidation
• How a CVA affects directors
• Can a CVA overcome landlord's inflexibility?
• Important points to consider when applying for a CVA
• Case Study: CVA tackles a Winding Up Petition
• Company Voluntary Arrangement FAQs
• When to use an informal debt management plan v a CVA

By Carl Faulds | 16th April 2014