What is a CVA?

When a company is in financial trouble there seems to be a main direction that directors turn to; liquidation. However depending on the circumstances there are a few business rescue alternatives that may suit the situation better.

The CVA (creditors’ voluntary arrangement) option provides a realistic alternative to liquidation for an insolvent company. This process gives directors an option of trading out of a difficult period to help with future profitability.

Below there are 8 key facts that all directors should know about the CVA option:

• There is no mandatory repayment time frame or repayment amount
• Following successful completion of the CVA the balance of debt not repaid through the CVA is written off
• The company remains under the control of the directors
• HM Revenue & Customs has a very high success rate for CVA acceptances
• A company needs only 75% of creditors’ to agree for a CVA to be approved
• The company is allowed to continue trading throughout a CVA
• To get the creditors’ approval you must show them how a CVA is more beneficial to them then the alternatives
• There is less focus on directors during a CVA and no investigations are made or submitted to the Insolvency Service

These facts highlight the key features of a CVA in which a director should be aware of when considering all the options available to insolvent and struggling companies.

This information was brought to you by F A Simms & Partners who specialise in advising and supporting on all business rescue matters. For more information regarding the content of this article please contact FA Simms & Partners today on 0845 072 2500 or email [email protected].

Date published 1 Mar 2013

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.