Company Voluntary Arrangement (CVA)

Debt solution for companies who are facing financial difficulties

What is a Company Voluntary Arrangement?

A company voluntary arrangement (CVA) is a debt solution for companies that are facing financial difficulties. It was introduced via the Insolvency Act 1986 as an insolvency service aimed at providing the time required to rescue a company and/or at least, its business.

If the debts accumulated are more than the company can afford to repay, it may find the best way forward is a CVA. To action this, the company directors will sign a legally binding agreement with the company creditors to secure a compromise on the debt repayments. The CVA is an agreement by the company to repay debts in part or in full, to the creditors, over a stated period of time.

What is the Company Voluntary Arrangement process?

First of all, the directors of the company must agree to enter the company into a CVA. Once this has been agreed, the company directors must appoint an insolvency practitioner (also known as an IP), who is then responsible for authorising the voluntary arrangement, all bound by the regulations of the Insolvency Act 1986.

The insolvency practitioner will oversee the whole process, dealing with the legal issues and court correspondence. The IPs will also arrange the meetings between the company directors and creditors to discuss and approve or reject the proposed company voluntary arrangement.

If the CVA is agreed between the company and its creditors, the insolvency practitioners will be responsible for overseeing the entire process for its stated duration, carrying out all related paperwork and keeping records of its progress.

What are the advantages of a company voluntary arrangement?

Not all financial problems within companies must lead to a CVA; each case is different, so what may work for one situation may not be suitable for another.

However, in many cases, a company voluntary arrangement is a straight forward and suitable insolvency service.

A company voluntary arrangement can help to;
• Reduce overall debt
• Increase cash flow
• Allow a company to continue trading

Entering into a CVA must be given some serious thought because, although there are many advantages, there are also some disadvantages to company voluntary arrangements.

Some of the advantages of company voluntary arrangements are;
• Your CVA will be kept out of the press
• It is legally binding
• You will be protected from your creditors providing you stick to the terms of your CVA
• Your business can continue trading under the control of the directors
• Allows time to repay debts and devise a structured plan for the future of the company
• A way of avoiding outright insolvency

Disadvantages include:
• Your creditors may take legal action against you if you fail to stick to the terms of your CVA
• You may struggle to secure credit for your company because of your CVA
• Basic details of the company voluntary arrangement are available to the public

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