A Guide to Company Voluntary Arrangements (CVAs)

A Customer Voluntary Arrangement (CVA) is a turnaround solution for businesses that may have become insolvent, so unable to pay their debts.

As a director, you may have recently recognised that your business is becoming insolvent or has already become insolvent. You know that your business model is profitable but have had a problem with cashflow which has caused some serious problems.

So how can a CVA help you?

Cashflow problems are a major reason for many would-be successful business failures. Working with recovery and turnaround experts, a CVA can be produced to help you overcome cashflow problems and see your business thrive once more.

CVAs are a legally binding arrangement between your business and its creditors, protecting your business against any potential legal action from your creditors. It gives you the time you need to restructure and refinance your business so your cashflow becomes healthy and can once more afford the debts it owes.

A CVA is a long term arrangement which usually lasts for up to 5 years, providing a financial forecast for your company. Drawn up with the help of the insolvency professionals, the CVA will then need to be agreed by at least 75% of your business creditors (based on debt value).

But why should your creditors agree to a CVA?

The bottom line is that your creditors will have to wait even longer to see a return on their investment or repayments on their debts. This being said, there are a number of reasons why their interest should be to agree with a CVA:

• They are more likely to get more of their money back compared to other solutions for insolvency (ie, Liquidation).
• Your business may become extremely successful in the future allowing them to improve on their return on investment.
• If you survive insolvency, your suppliers will be able to continue to sell to you.
• The government, HMRC, prefer you to use customer voluntary arrangements as a fix for insolvency issues.

The next step to acquiring a CVA

By getting in contact with an insolvency practitioner as soon as you can, you are more likely to acquire a CVA and convince your creditors that you are genuine and proactive. At Business Recovery we can offer the business turnaround and restructuring services and advice you need to get started.

Call us now for free no obligation advice on 01451 832533 or alternatively request a call back and we get in touch with you shortly. We are happy to answer any questions you may have.

About the Author

Mark Jefferson is a seasoned commercial finance professional with over 25 years’ experience in financial services, much of that spent providing funding to SMEs. Mark has worked with many other firms in a similar situation to yours. Call Mark on 01451 832533 and you can also follow him on Google+

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