Company Debt Help with a CVA
When a company is insolvent but has an underlying profitable business, it may be appropriate for a director to seek the agreement of creditors to a Company Voluntary Arrangement (CVA) to help with business debt. This is a legally binding agreement that enables repayment of its liabilities, in full or in part, so that a business can continue trading under the control of the existing management team.
If you’re looking for more information about a CVA and our other available company debt help services, contact one of our experienced team members at Restart BTi. We’re experienced in helping businesses come to fair agreements with their creditors such as HMRC, landlords, suppliers and more.
What is a Company Voluntary Arrangement?
A CVA is a legally binding contract between a business and its creditors to repay its liabilities whilst the business continues to trade, and subsequently help with business debt. A Proposal for a CVA is drafted by the Insolvency Practitioner and is sent to all known creditors for their approval. If 75% of creditors by value vote in favour, the proposals are approved. Once agreed, a business is able to continue to trade subject to the terms of the Proposal.
It is important to note that if that business does not comply with the terms of the Proposal, the CVA may terminate and there is a risk that it may go into liquidation. While a Company Voluntary Agreement may sound daunting, they offer many advantages to a business that needs company debt help compared to other methods. This includes releasing the Director(s) from any increasing pressure from creditors, the insolvency is not publicly advertised, it provides a lower-cost alternative to Administration, and much more.
What are the risks of a Company Voluntary Arrangement?
As with any legal proceeding, it’s important to be aware of the risks involved and what this could mean for you. While a CVA may be the best option to help with business debt for some, it does involve risks that all Director(s) using this route should be aware of. This includes:
- Damaging the company’s credit rating, making it extremely difficult for the company to be granted credit from suppliers in the future.
- It can be a lengthy process to obtain a Company Voluntary Arrangement, meaning that further action may be required to protect the company from any legal proceedings while the contract is in draft.
- Secured creditors will still withhold the power to appoint their own administrator for any proceedings, or withdraw funding from the company at any point with immediate effect.
Is my business eligible for a CVA?
As with any agreement, a certain criteria must be met. To be considered for a CVA, your business must:
- Be insolvent.
- Have an appointed Insolvency Practitioner willing to act as Nominee.
- Must provide a realistic and achievable rescue plan and be able to demonstrate that the company maintains its ongoing liabilities during the duration of the CVA.
Why would a business choose a Voluntary Arrangement rather than Liquidation?
Making the decision to seek a Company Voluntary Arrangement for company debt help instead of waiting for Liquidation to come into effect may save your business. Through a CVA, a Director(s) will be provided with the opportunity to pay off any creditors debt in full, with time and guidance provided on how to turn their insolvent business around. In other words, seeking help to pay off company debt could help to rescue your business.
Through a CVA, Directors will be provided with more time and direct communication to their creditors to agree upon a payment plan over three to five years. This is an opportunity that is not provided with Compulsory Liquidation, where a company is forced by their creditors to liquidate their assets in order to pay off outstanding debts.
What is the process of a Company Voluntary Arrangement?
Once you have appointed your qualified Insolvency Practitioner to help with company debt, they will review your company’s finances, business plan, structure and more to draft together a CVA proposal. This will require the Director(s) of the company to send over all relevant information to be explored, as this will be used to create a ‘business forecast’, which will outline a thorough plan and prediction on when the business can be up and running as normal again, with a profit margin.
Once the proposal is complete, it will be sent to the Director(s) and creditors. Here, it will be highlighted how the company is to settle its outstanding debts to creditors. To ensure the success of a CVA, it’s important that all secured creditors support the proposal.
When the proposal has been approved, it will be sent to court. A formal copy of the CVA is then sent out to creditors, inviting them to take part in a decision procedure which will either approve or reject the proposals. To guarantee success, 75% of all creditors voting must agree to the outlined provisions for the company to pay their outstanding debts. If approved, it will be the responsibility of the Practitioners to oversee that the Company adheres to the terms of the proposal.
How can Restart BTi help with your Company Voluntary Agreement?
A CVA can only be proposed with the involvement of a licensed insolvency practitioner. Here at Restart BTi, we are an experienced debt help company, meaning that our expert team will work with you to make sure that you are given the right advice and that a CVA is the correct process for the Company. We endeavour to ensure that the procedure is concluded as quickly and as pain free as possible.
We offer a service that includes a free initial consultation, expert guidance and support, confidentiality, and a fully licensed practitioner that will support and stay with you throughout the full process. To get in contact and receive your free consultation, simply fill out the short form below.
Despite a Company Voluntary Arrangement being typically the result of an insolvent company, it is likely that a business will continue to operate once the CVA process is complete. However, this depends on the individual circumstances, as in some cases a company can continue to operate despite insolvency. For more information, you will need to talk to one of our qualified Insolvency Practitioners.
Typically, a CVA lasts around 3 to 5 years. The timescale for a CVA to be completed can vary depending on the amount due to pay, and how much money a company makes.
It is the responsibility of the company to pay for their Voluntary Liquidation. If you find that your business is in debt, company help is the best course of action for rectifying the situation. Speak to a member of our team for more information.
Director conduct is not investigated as part of a CVA. No liquidator is appointed during this process and the business will continue to operate as usual. This is a great advantage if the business is still viable.
Unlike other insolvency processes, a CVA is not made public. There is no requirement to tell customers about a CVA, nor does it need to be disclosed on company correspondence. It is essentially a private process between the company and its creditors.
FAQs
Director conduct is not investigated as part of a CVA. No liquidator is appointed during this process and the business will continue to operate as usual. This is a great advantage if the business is still viable.
Unlike other insolvency processes, a CVA is not made public. There is no requirement to tell customers about a CVA, nor does it need to be disclosed on company correspondence. It is essentially a private process between the company and its creditors.
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Restart BTi
Suite 44 Dunston House
Dunston Road
Chesterfield
Derbyshire
S41 9QD
- 01246 959 388
- Fax: 03333 444 993
- Email: enquiries@restartbti.co.uk
Restart BTi is the trading name of Restart Business Turnaround Insolvency Limited, a limited company registered in England and Wales no: 11517419
Registered Office: Suite 42 Dunston House, Dunston Road, Chesterfield S41 9QD
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