Applying For A CVA (Company Voluntary Arrangement)
In times of recession, it can be hard for businesses to make sure that they are making enough money to pay all their creditors. With less money coming in, and more going out, debts can soon begin to pile up. Once a business’s liabilities exceed its assets, it becomes insolvent, and action needs to be taken to ensure creditors are paid, and the business survives. One of the preferred options might be a Company Voluntary Arrangement. A Company Voluntary Arrangement is a formal arrangement between a business and it’s creditors. It sets out how the debts are to be repaid, whether in part or in full, and over how long the repayment will take place. Once agreed, there are a number of benefits to a company of having a CVA in place, as long as they stick to the terms of the arrangement. One of the biggest benefits of a Company Voluntary Arrangement is that, as long as the business keeps to the arrangement, they are free to continue trading. They are also given protection from any further action by creditors, which can provide the necessary breathing space to restructure the company’s finances, to help the business recover. The amount of debt could be reduced, as creditors are willing to accept part-payment instead of the possibility of receiving much less, if the company stopped trading and went into liquidation. A CVA is typically less expensive than Administration or Receivership, and makes repaying creditors easier for businesses to manage. In order for a Company Voluntary Arrangement to be agreed, 75% of the business’s creditors need to be happy with the debt repayment proposal in the arrangement, which then means all of the company’s debts would then be covered by the arrangement. To ensure that creditors agree to a CVA, it is therefore important that a business puts forward as fair and honest a proposal as possible. It’s in the interest of the creditors and the company with the debts to make sure a CVA is agreed, and that it will work. As an alternative to Receivership and Liquidation, Company Voluntary Arrangements are preferred by many creditors, who are likely to get more of their money back, as well as businesses in debt, because it gives them the protection and opportunity to trade out of their debt problems. If your business is affected by insolvency and you feel a CVA may be your best option, make sure you get advice from a professional as soon as possible. They will do everything they can to advise you on CVAs and the best way to make sure your business survives. Find Out More : CVA |