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Company Voluntary Arrangement

Reviewed 18th February 2020

What is a Company Voluntary Arrangement?

A Company Voluntary Arrangement is a formal agreement that restructures your company’s debt, whilst enabling you to continue trading. Unsecured debts can be included, such as those owed to suppliers, trade creditors, and utility companies.

A CVA may be an option if your company is experiencing temporary financial problems, is expected to recover in time, and can support the monthly payments. If approved, the arrangement becomes legally binding for all parties as long as your company maintains the new repayment schedule for the duration.

How do Company Voluntary Arrangements work?

Company Voluntary Arrangements typically last for 3-5 years. The arrangement details the amount of debt that will be written off at the end, and once it’s in place, all interest and charges are frozen.

A licensed insolvency practitioner (IP) is appointed to analyse the company’s financial position and put forward a proposal to creditors. They then vote on the CVA, and 75% (by value of debt) need to be in favour before it’s approved.

We can assess whether your company is eligible for a CVA, and formally negotiate with creditors to reduce the monthly payments on your debt. If a Company Voluntary Arrangement isn’t appropriate we’ll provide reliable advice on the best way forward.

So what are the main eligibility criteria for a CVA?

Is a CVA suitable for your company?

The company must be insolvent to be eligible for a Company Voluntary Arrangement, and a licensed IP must believe it’s viable for the future. This means the business must be able to support the new debt repayments whilst continuing to meet ongoing liabilities such as tax, National Insurance, and operational costs.

Our team can explain the benefits of entering into a CVA with your creditors, as well as describing any potential downsides that might arise during the course of the arrangement.

So what are the main advantages and disadvantages of a CVA?

Advantages of a Company Voluntary Arrangement

  • Interest and charges on your debts are frozen
  • Your creditors can’t contact you or take any legal action against the company, such as a winding-up petition, whilst you adhere to the new repayment schedule
  • You regain control of the company once the insolvency practitioner has carried out their duties
  • The company can continue trading, so bad publicity is minimised
  • Any debt remaining at the end of the term may be written off
  • Your conduct as a director isn’t investigated

Disadvantages of a CVA

  • It’s a long-term arrangement, potentially lasting up to five years
  • Your company faces liquidation if you’re unable to meet the new repayment schedule for the full term
  • The arrangement appears on the company’s credit rating for six years
  • Secured creditors aren’t legally bound to the agreement

Professional help from licensed insolvency practitioners

Our team has extensive experience of helping limited companies industry-wide to deal with debt, and regain their position in the market. We’ll offer reliable independent advice on your situation, and negotiate with creditors on your behalf.

If a CVA isn’t appropriate we can also provide trustworthy guidance on any alternative options. Scotland Debt Solutions operates from a network of offices around Scotland, and can offer you a free same-day consultation with one of our partner-led team.

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