CVA stands for a company voluntary arrangement, and it is classified under UK insolvency law. The CVA is a form of composition, and it allows a company that is suffering with debt problems to reach a voluntary arrangement with its creditors in order to arrange repayment of all or part of the company’s debts over a certain period of time, which is agreed by both partners. Here, we’ve put together a quick guide to tell you more about what a CVA is and how it may be able to help your business.
Who Can Implement A CVA?
A CVA can only be implemented by an insolvency practitioner, but it has to be agreed and accepted before it comes about. The practitioner will draft a proposal to the creditors, and they will then have a meeting to determine whether they want to accept the proposal or not. The company voluntary arrangement will only be accepted as long as 75% of the creditors (calculated by debt value), agree to it. The company creditors will then be bound to the terms of the proposal, and therefore will no longer be able to take further legal actions in order to collect the debt, as long as the terms are adhered to. If 75% of the creditors cannot agree to a company voluntary arrangement, then you company could ultimately face voluntary liquidation.
Drafting A Company Voluntary Arrangement
The proposal written up by your insolvency practitioner can include a number of things: the financial difficulty arose or came about, up to date information regarding the company’s financial position, how much the company can afford to pay back month-on-month and the predicted duration of the CVA. Once this draft has been put together, you are able to review it and make any necessary changes in order to ensure that your business can keep up with the CVA if it is agreed by the creditors.
While this is rare as a moratorium is difficult to obtain, to reduce or avoid creditor pressure you can apply for one of these through the courts. If it is granted, then creditors cannot take any legal action, providing you and your company with a little extra breathing space.
When it comes to a CVA, companies can have various benefits. Firstly, it can help to improve your cash flow quickly and stop pressure from tax while the CVA is being prepared. In addition to this, the CVA allows creditors to retain the customer, and still receive some of the debt back over time. In addition, the board and shareholders remain in total control of the company throughout the CVA. In short, you can prepare a CVA agreement to help your business.
What Happens If You Don’t Meet The Payment Schedule?
If your business is struggling to keep up with the payment schedule that is agreed to in the CVA arrangements, then any of the creditors can apply to wind up your business. This means that your company can end up being liquidated if it cannot keep up with the debts, and the creditors of your company can apply to the court to get their debts paid. This can be done through either a court judgement or through a statutory demand (an official payment request).
http://www.paisley.org.uk/wp-content/uploads/2016/01/paisley-abbey-logos.png6831024Danielle McGowanhttp://www.paisley.org.uk/wp-content/uploads/2015/09/paisley-logo-trans.pngDanielle McGowan2017-02-21 16:31:452017-02-21 16:31:45What Is A CVA?