What is a CVA?
A Company Voluntary Arrangement (CVA) is a formal process enabling a legally binding agreement to be entered into between a company and its creditors.
It was introduced by the government in 1986 as an alternative to companies facing liquidation. A CVA allows the directors to retain control of the company and attempt to trade out of difficulties.
All creditors are then legally bound to accept the terms of the arrangement. A proportion of the debts will be repaid monthly over a fixed period of time usually five years.
Alternatively, the company may look to sell assets and repay creditors from the proceeds. The arrangement will stop any further interest and charges being added to the company debts and creditors will be prohibited from demanding additional payments.
Do I qualify for a CVA
To qualify the Company must have unsecured debts of £15,000 or more and a minimum of two creditors. An affordable repayment offer will be made to the creditors and this payment must be made monthly.
Company circumstances will influence if the creditors must be repaid in full or if only a percentage of the debt is repaid.
Once the repayment structure is agreed, the arrangement is overseen by a Licensed Insolvency Practitioner who acts as Supervisor and sets out the parameters of the CVA in a proposal.
As long as the monthly payments are maintained, the Company is normally debt free in 5 years or less.
Once the CVA is successfully completed all other outstanding debts are written off.
Creditors are usually willing to support a CVA, even though they’re unlikely to recover all that they are owed. As opposed to alternative solutions such as company liquidation which would see them receive significantly less or nothing.
Your CVA has to be set up by a Licensed Insolvency Practitioner (IP). At Orchard Debt Solutions we work with a panel of Insolvency Practitioners and the most suitable IP will be selected for your circumstances.
Orchard help with a CVA
We will hold your hand throughout the process and support you in obtaining all the information required to draft your proposal. This includes producing cash flow forecasts that will help determine the monthly contribution to your creditors.
Conversations will also take place with creditors who are putting you under immediate pressure. By working closely with yourself and the IP we aim to make the process hassle free from start to finish.
- The company can continue to trade.
- Debt repayments will be consolidated.
- Offers protection from creditor legal actions.
- Cash-flow can improve.
- Not a short-term option.
- Breaking the terms could result in liquidation.
- Your company credit rating could be affected.
- At least 75% (by value of debt) must approve the proposal.