If you’re struggling to pay your debts, suppliers and/or HMRC here’s how a Company Voluntary Arrangement (also known as a CVA) can give you the time that you need to save your business.
“The problem which caused us to seek help was cash flow. The CVA really worked for us. It took the pressures off from legal action, HMRC, winding up notices, and let us focus again on running our business and getting back on track.”
A Company Voluntary Arrangement is not for terminally ill companies. A CVA is for companies struggling with debt which, given time, and a turnaround plan, can be rescued and become solvent and successful again. A CVA is about providing a second chance.
Are you being kept awake in the middle of the night worrying about how your business can pay suppliers or HMRC?
Are you frequently under threat of legal action or the risk of a winding-up order?
Small and medium-sized businesses like yours make up over 90% of the Company Voluntary Arrangements approved in the UK.
The process is a valuable tool to rescue your business from insolvency, legal action and being wound up by the Courts.
If you think your Company is insolvent or has insufficient cash to pay its debts, believe your Company has a future, but just need some debt relief, breathing space, and time to make payments, then a Company Voluntary Arrangement gives the business the best chance of survival.
What are Company Voluntary Arrangements?
At its simplest, a Company Voluntary Arrangement is a proposal to a Company’s unsecured creditors to repay debts over an agreed period, typically 3 to 5-years, at a rate that is affordable to the Company and agreeable to the majority of creditors.
There are exceptions, for example, a CVA paying off legacy debts with a single settlement. Generally, you are looking at a process that is going to be managed over a 3 to 5-year time frame.
When a business appears to be viable, with the prospect of becoming profitable again, and the directors are willing to continue, a CVA may be an ideal way to protect against legal actions taken by creditors.
The terms of a CVA are likely to provide for a discount in the overall debt owned, lower monthly outgoings, and improved cash flow for the Company.
On the whole, creditors benefit as they have the comfort of independent supervision of a binding contract for all creditors, increasing the likelihood of returns that they would not get if the Company is liquidated.
The CVA Process
A compelling voluntary arrangement proposal can take time to write and prepare. The process should not be a simple cut and paste or a mail merge…
It needs a carefully thought out turnaround plan, proposing real changes in the current business model, which needs to have a properly prepared profit and loss, and cash flow forecasts.
So in our view, the sooner directors confront insolvency or a liquidity crisis, the more options and time they will have to ensure the best outcome for the Company.
However, the CVA process can be proposed to Creditors at any time. If you’re confronting a winding-up petition, we can seek an adjournment to secure a CVA. If you have been wound up, we can seek creditors support to exit the liquidation or administration via the CVA.
We have included a flowchart to show you the entire process of a CVA in our guide: Five Steps to SUCCESSFULLY Rescue Your Business using a Company Voluntary Arrangement that has a high chance of SUCCESS, which you can download here.
So, would you like to…
- Start over again and get a second chance to build your business, for you, your family and stakeholder?
- Build a Healthy Bank Balance and have funds to pay bills as they fall due?
- Feel confident your business model is successful and profitable?
- Reduce the amount of stress you are under and get some sleep?
Here’s what you need to do next…
Next Steps
- If you haven’t done so already, we highly recommend that you download our guide ‘5 Steps To Successfully Rescue Your Business Using A CVA That Has A High Chance Of Success’. This will give you a good understanding of the pros and cons of using a CVA and how to maximise the chances of your CVA being successful.
- It’s also important that you recognise some of the potential pitfalls you must deal with before you seek a CVA. There are a number of red flags which must be carefully considered. That’s why we have prepared a video tutorial which is titled: 5 Steps to CVA Success. In this video, we will explain more about the process, the critical red flags you need to be aware of and we will show you how we have successfully helped a number of companies rescue their business by using a Company Voluntary Arrangement. You can watch the video tutorial for free by clicking on the following link 5 Steps to CVA Success (Plus 2 real-life case studies, and 5 Red Flags to look out for.
- If you’re ready to speak to someone, we recommend a face-to-face meeting. One of our business turnaround specialists can meet you at your home, place of work or a convenient location of your choosing. With lockdown, we can hold this initial meeting via video conference call. At the meeting, we will discuss your options in more depth. This initial consultation and advice are entirely free of charge. If you click on the following link, you can book an appointment directly with Kevin Pritchard.