Some helpful information about Business CVAs
What are the benefits of a Business CVA?
You could avoid liquidation: The primary advantage of a CVA is that it allows you to continue trading while restructuring your company’s operations and finances, with the aim of coming out of debt and ready for a profitable future.
You can continue trading: This is crucial for preserving the value of your business. It’s also a benefit for creditors, who often get more of their funds back than if you were to liquidate and close the company.
You can restructure your debt: A CVA enables you to renegotiate and restructure the company’s debts with its creditors, which can significantly alleviate the financial burden, improving cash flow.
You could retain your reputation: Entering into a CVA maintains your relationship with stakeholders, such as customers, suppliers and employees. This can be beneficial for the company’s long-term success.
What happens in a Business CVA?
1. Assessing viability: The first step is to assess your company’s financial situation and determine whether a CVA is a viable option. We’ll analyse its assets, liabilities, cash flow and it’s potential to return to profitability in the future.
2. Preparing the proposal: If a CVA is possible, and you want to pursue this option, we’ll prepare a detailed proposal outlining the terms of the arrangement. This includes the proposed repayment plan, the duration of the CVA and any concessions sought from creditors.
3. Creditors’ meeting: We’ll arrange and hold a meeting of the company’s creditors, including HMRC, where the CVA proposal will be presented and discussed. Creditors will have the opportunity to ask questions, raise concerns and ultimately decide on whether to accept or reject the proposal.
4. Approval and implementation: If the Company Voluntary Arrangement proposal is approved by the required majority of creditors, it becomes legally binding. We’ll then oversee the implementation of the CVA, monitoring compliance with the agreed terms.
5. Supervision and reporting: Throughout the duration of the CVA, we’ll work with you to improve the company’s operations and financial performance. Regular reports will be provided to creditors, to show them you’re keeping to the agreed plan.
6. After the CVA: If the company and its directors successfully comply with the terms of the CVA and make the required payments, the arrangement will be completed. If it becomes clear that the company can’t meet its obligations, we can work with you to explore one of our other insolvency solutions.
The role of your licensed insolvency practitioner is crucial throughout the CVA process. We act as an independent intermediary between your company and its creditors and ensure transparency, fairness and adherence to the legal requirements.
Can I use a CVA to repay tax debt to HMRC?
Money owed in unpaid tax is often one of the biggest debts a company has. We’ll work with you to put together a compelling case for why a CVA is the right option, giving the best chance of HMRC accepting the proposal.
Interest and charges are frozen: The accrual of penalties and interest on the outstanding HMRC debt can be frozen. This prevents the total debt from increasing further.
Legal action is prevented: Once the CVA is in place, HMRC cannot pursue your company for the debt it relates to, as long as the terms of the CVA are met.
Payments can be more manageable: We’ll work with you to make sure the monthly contributions are based on what the company can afford, after taking into consideration your operating expenses.
What are my options if I don’t qualify for a CVA?
A CVA can be an excellent option for businesses that are fundamentally sound but temporarily struggling with debt. If you still have consistent revenue streams, valuable assets or clear opportunities for growth, a CVA could be the key to turning things around.
It’s also essential that you, as the director, are fully committed to the process. A CVA requires discipline and transparency, as well as a willingness to follow the agreed repayment plan over an extended period.
On the other hand, if your business has no viable future and no realistic ability to repay even a portion of its debts, there are alternative insolvency options. For example, liquidation or company administration might be more appropriate.
To determine whether a CVA is the right choice, our licensed insolvency practitioners can provide an honest assessment of your company’s financial health and long-term prospects.
