Home » Insolvency Practitioner Services in UK » Company Voluntary Arrangement (CVA)

Company Voluntary Arrangement

A Company Voluntary Arrangement (CVA) is a formal agreement between a company and its creditors to restructure and repay debts over a fixed period while continuing to operate. A CVA is ideal for businesses with short-term financial difficulties but long-term viability.

When to Consider Company Voluntary Arrangement (CVA) :

Short-term Cash Flow Issues:

The business is struggling with cash flow but remains operationally viable.

Creditor Pressure:

Creditors are pushing for repayment, but the business needs time to reorganize finances.

Potential for Recovery:

The company has long-term viability if given time to restructure.

Debt Restructuring:

The company can continue trading while making affordable payments to creditors.

How RTI Can Assist:

RTI works with you to negotiate a CVA with your creditors, helping you restructure your debt and providing the breathing room your business needs to return to profitability. Our licensed insolvency practitioners will guide you through the process, ensuring the CVA is structured in a way that benefits both the company and its creditors.

FAQ

How long does a CVA (Company Voluntary Arrangement) typically last?

A Company Voluntary Arrangement (CVA) usually lasts between 2 to 5 years, depending on the terms agreed upon by the creditors and the company. The specific duration is determined by the company’s ability to repay the agreed portion of its debts over time. Once the agreed period has been completed and the payments have been made, the remaining debts are written off.

Do all creditors have to agree to a CVA (Company Voluntary Arrangement)?

No, not all creditors need to agree to the CVA for it to be approved. For a CVA to be accepted, 75% (by debt value) of voting creditors must approve the proposal. Once the CVA is approved by the majority, it becomes legally binding on all creditors, even those who voted against it or did not vote at all. This ensures that the company has a manageable debt repayment plan without requiring unanimous creditor agreement.

What happens if the company fails to meet the terms of the CVA (Company Voluntary Arrangement)?

If a company fails to meet the terms of the CVA, the arrangement may fail. In such cases, creditors can take further legal action, such as petitioning for liquidation or administration. Typically, the insolvency practitioner overseeing the CVA will try to renegotiate with the creditors or find alternative solutions. However, continued non-compliance may lead to the company being wound up.

What are the benefits of a CVA (Company Voluntary Arrangement) over liquidation?

A CVA offers several key advantages over liquidation, including:

Continued Trading: The company can continue trading, retain employees, and maintain its client base.
Debt Repayment Flexibility: A CVA allows the company to repay debts over time, usually resulting in a reduction of overall debt.
Avoidance of Liquidation: It prevents the company from being wound up, allowing for the possibility of recovery.
Creditor Protection: Creditors are legally bound by the CVA, meaning they cannot pursue further legal action against the company as long as the terms are met.
Less Negative Impact: A CVA is generally viewed more positively than liquidation, preserving the company’s reputation and helping it rebuild in the future.

While a CVA allows the business to continue operating under a debt repayment plan, Company Administration may offer more protection from creditors while the company reorganizes. Depending on the severity of your situation, administration might provide the necessary protection.

Company Voluntary Arrangement