CVAs with Ingenious Turnaround
What is a CVA?
A CVA is a voluntary agreement between a company and it’s creditors. Some CVAs can write off up to 80% of company debts, so can be highly beneficial to a struggling company. The remaining percentage is then broken into an agreed payment schedule which is overseen by an insolvency practitioner.
The arrangement combines all company debts into one single, affordable monthly payment. This allows a company to move forward without being dragged down by aged debts.
A Company Voluntary Arrangement can also be used to halt a winding up petition if it’s proposed within 7 days of the petition being served on the company. It also immediately relieves any pressure that creditors or HMRC are placing on the company to pay it’s debts, with an arrangement usually happening within a number of weeks.
Key points for a Company Voluntary Arrangement (CVA)
Advantages and Disadvantages of a CVA
- Immediately stops pressure from creditors and HMRC while a CVA is being arranged.
- During the CVA period, company creditors cannot take any legal action once the CVA has been approved.
- All creditor payments are rolled into one single affordable monthly repayment.
- Improves company cashflow – Reducing the monthly company outgoings, allowing the company to focus on moving forward.
- Provided that a CVA is proposed within 7 days of a winding up petition, it can immediately halt this petition.
- Unlike administration – The company directors stay in control of the business, and do not have to advertise that the business is in financial difficulty to suppliers.
- Determines the best way out of the situation for both the company and it’s suppliers. Suppliers will receive between 20% – 100% of their original amounts due (in some cases they would receive 0% if a company goes into liquidation).
- If you miss a payment without good reason, you could be forced into liquidation or administration.
- Obtaining credit is a lot harder during a CVA period. A CVA usually wipes out any good credit rating a company would have had beforehand.
- Getting fellow directors to agree that a CVA is the best route forward can be tricky.
- If you’re a creditor looking to force a CVA onto a company, this cannot happen – It must be agreed by the company directors.
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