A Company Voluntary Arrangement is particularly effective when a Company has had temporary cash flow difficulties or other problems that have since been dealt with but which have left the Company with unmanageable debts.
As Company Voluntary Arrangement payments are based on what the Company can afford according to its cash flow forecasts rather than the debt owed, most Company Voluntary Arrangements result in the Company paying less than 50% of the total debt back with the rest written off after 5 years.
How a Company Voluntary Arrangement can Work for your Company
A Company Voluntary Arrangement is flexible, giving the Company the opportunity to trade out of its current financial difficulties. The terms of the CVA depend on the specific circumstances your Company finds itself in and what its creditors have agreed to. A CVA can involve monthly payments based on cash flow, delayed or reduced payments of debt, capital restructuring or sale of some of the Company’s unnecessary assets.
In most Company Voluntary Arrangements, your secured creditors such as your factoring company or bank will be specifically excluded from the Company Voluntary Arrangement because they already have security. By excluding these creditors you are able to continue to operate your facilities with them, thus protecting your day to day funding.
Because a Company Voluntary Arrangement allows the Limited Company to continue in its existing legal form it allows existing contracts to be maintained. This is particularly important if the Company has long term contracts that were hard to obtain and which would terminate if the Company was placed into Liquidation or Administration.
A CVA allows the Company to continue to trade with the support of its suppliers.
How a Company Voluntary Arrangement is Approved
Whilst creditors may be disappointed that they are not going to to be paid in full, most view a Company Voluntary Arrangement as a preferable alternative to Liquidation in which they would typically get nothing at all. Because of this, many suppliers will continue to support your Company throughout the Voluntary Arrangement thus enabling you to continue to trade.
A Company Voluntary Arrangement requires the support of 75% of its creditors by value to be approved. We liaise with your creditors throughout the process to ensure that they can see the benefit of the increased return offered by the Company Voluntary Arrangement over Liquidation. Because of this proactive approach, over 90% of our Company Voluntary Arrangements are approved by creditors.
As the Company Voluntary Arrangement payments are based on what the Company can afford according to its cash flow forecasts rather than the debt owed, most Company Voluntary Arrangements result in the Company paying less than 50% of the total debt back with the rest written off after 5 years. This is a far better result for creditors than Liquidation where typically creditors get nothing and also allows you to save your Limited Company.
When you get in touch with us, you will speak directly to a licensed Insolvency Practitioner from the outset. We will take the time to understand your Company’s financial position, what your future intentions are for the business and ultimately what outcome you are hoping for.
If you want to know more about entering into a Company Voluntary Arrangement, we can provide you with guidance on how to get started and can advise whether a Company Voluntary Arrangement is likely to work for your business.