Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement is a medium to long-term solution when a business wants to restructure in a manner which helps repay debts.

At Hillcrest Finance, we can help businesses which feel this action would be a good fit for their long-term goals. With it being a practice which has to meet certain criteria before any talk of restructuring is undertaken, knowing what a business should do before committing to a CVA is important.

If you are running a business and feel a corporate voluntary arrangement may be the best corporate debt solution for your circumstances, talk to Hillcrest Finance today.

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Is a Company Voluntary Arrangement a good idea?

A CVA is a good idea when you feel that a business is viable to work and has been placed in a position where debts are causing problems. A common scenario for companies which undertake a CVA happens when a large client pulls out, or VAT (and associated taxes) are beginning to cause issues that weren’t present before.

Anytime a company wishes to undertake a CVA, they need an insolvency practitioner to come on board, which the team here at Hillcrest Finance can assist with.

How does a Company Voluntary Arrangement work?

Almost all CVAs will follow a similar process. The director(s) of a company will decide that it is the most appropriate debt solution to follow and will get in touch with an insolvency practitioner (IP). The IP will review finances and create a proposal which is given to the court, and then creditors.

Those creditors can then vote on the proposal, with the vote needing a majority of 75% to pass. If it does pass, the CVA is put in place by the practitioner, debts are frozen, and the company starts paying creditors at the agreed amount.

When the arrangement has ended, and the agreed amount is paid, the remaining debts are wiped without creditors able to take further legal action.

Advantages of a Company Voluntary Arrangement.

CVAs are helpful if:

  • You know the business is viable
  • Your business can write off debt which would otherwise not get paid
  • You want some protections in place while paying off debts
  • You get an agreement without full backing as your proposal is deemed fair
  • You want an arrangement set-up quickly (can sometimes take less than 10 weeks)
  • You can avoid having information going public, as would happen if deciding on administration

Disadvantages of a Company Voluntary Arrangement

A CVA may not be the best option for your company. Some disadvantages can include:

  • The length of time an agreed CVA has to last – can be anywhere from 6 months to 6 years
  • It always needs a majority vote to pass
  • It will affect a company’s credit rating
  • Existing clients may not be happy

Demystifying Company Voluntary Arrangements

When companies first get in touch with Hillcrest Finance, they’ll have a million and one questions which need answering. Our advisors have seen it all before and can highlight where issues which may be on your mind are minor, and what problems you need to dispel.

Whether it’s understanding that the HMRC prefers CVAs in many cases, or that customers & clients will stick with you if you have a viable business, it helps to speak with our team and get those nagging questions answered.

What happens when a Company Voluntary Arrangement runs into problems?

Let’s say your business is already in a CVA and you realise upcoming payments are going to be an issue. When this happens, it is preferable to see if minor changes can be made to extend the payment timeframe and lower payments, just like changing mortgage rates. When issues like this happen, a clearly thought out proposal will help creditors give their approval in what could be a much more difficult second vote.

Is a Company Voluntary Arrangement better than liquidation?

It may seem like closing up shop and moving on would be the easiest option, but all things need to be considered. A CVA may be preferable to the true cost of liquidation, and it is important to weigh up both. Again, this is something the practitioners at Hillcrest Finance can advise on.

Get advice on using Company Voluntary Arrangements experts

If you’d like to speak with someone about CVAs, or any of the corporate debt solutions we offer, please get in touch by phone on 0141 478 0862. Lines are open every weekday from 8 am.

Get in touch with us about a CVA today