Company Voluntary Arrangement (CVA)
With a Company Voluntary Arrangement (CVA), an insolvent company can reach an agreement with commercial creditors to repay all or part of a debt for an agreed period (usually 5 years). The legal agreement will stop your creditors from hassling you and can assist with cashflow.
Similar to an Individual Voluntary Arrangement for personal consumers, a CVA can help an insolvent company tackle their debt problems in a productive way.
CVAs have to be set up and managed by a qualified insolvency practitioner. This party will review the company’s finances before submitting a proposal to the company’s creditors.
The CVA proposal will include details of the all liabilities and assets. It will make an offer for repayment and propose for the payback of all or part of the debt.
75% of creditors (by debt value) of those creditors who decide to vote must agree to the terms for the CVA to be accepted. This will be decided at a creditors meeting, after which the arrangement will become binding on all parties.
CVAs offer a number of advantages and legal protections for indebted companies. The benefits include:
- The company only has to make one payment each month. The payment is made directly to Umbrella who will then distribute the payments to creditors in line with the arrangement.
- The payment will be more affordable.
- Once approved, a CVA makes business more stable and can help boost cashflow.
- A CVA prohibits creditors from continuing or initiating legal action against a company.
- A CVA can restrict interest and other charges added to historical debts from the date of approval.
- After the payback term is finished, any outstanding unpaid debt is written off. This includes debt owed to HMRC.
Umbrella’s team of experts have a broad range of experience in commercial liquidations. For a free and strictly confidential consultation contact a member of the team. Call: 0800 611 8888 or email us.