Do You Need A Company Voluntary Arrangement?

If you feel you have a viable business that’s struggling under the burden of debt, a Company Voluntary Arrangement could be the lifeline your business needs.

A Company Voluntary Arrangement (CVA) is a Company rescue and restructure option which allows the directors to stay in control of the business but can ensure the survival of your company by freezing debts, freezing legal action and giving you up to five years to repay your creditors.

If you’re not sure what a Company Voluntary Arrangement (CVA) entails or whether it’s right for your company, you’ve come to the right place. 4R Business Recovery have helped hundreds of directors and companies  protect themselves from creditor pressure.

To find out what steps are appropriate for your business, call us now on 0800 0385 140 or request a free call back. We offer honest, pragmatic advice on the best options for you and your business.

What is a Company Voluntary Arrangement? (CVA)

A CVA is a formal arrangement which allows you to freeze unsecured debts owed to creditors, write off some of the money by way of debt relief [and pay the remainder back over a period of time from future profits and cash flow]. It provides a legal moratorium to protect the company from legal action such as county court summons and judgements and winding up petitions and walking possession orders.

Money is paid back over a period of up to five years, and the agreement protects the company from more aggressive action from suppliers, banks and HMRC. A key benefit of a CVA is that not all creditors have to agree with the proposal. A meeting is held, and of the creditors that vote, there needs to be a 75% majority (by debt value). All this means the company has a bit of breathing space, which might be all it needs to return to profitability. That’s what it’s all about – you want to turn things around so your business is a success.

Compared to other solutions you could consider, a CVA is less disruptive, simpler and less drastic.. The company continues to trade and the directors are still in charge. That means you’re still in control.

Is a CVA Right for me?

A CVA is a good solution if your business has the potential to be profitable, but it’s fallen on hard times. A lost contract or bad debt means cash flow is poor and the business is struggling to pay its debts. However, with the right support and a little breathing space, you think you can get the company back on track.

A CVA allows you to reduce pressure from HMRC and other creditors, cut costs and restructure the business quickly and efficiently. If you want to stay in control and trade your way out of difficulties, a Company Voluntary Arrangement is the best option.

For a CVA to work, it has to be well planned. It’s great if you want the chance to turn your company around and are prepared to work hard to do so. We work closely with clients to ensure our CVAs are practical and achievable. But that’s not all – we’ll be alongside you every step of the way. After the CVA is in place, we’ll continue to provide the advice you need to restructure the business and get back into profit.

What are the benefits of a CVA?

Company voluntary arrangements have a number of advantages for you and your company:
  • A company voluntary arrangements normally improve a companies cash flow  immediately
  • Stop pressure from HMRC while a CVA is being prepared
  • A CVA process can stop a winding up petition and secure court adjournments
  • Significant debt relief with up to 80% of the company’s debts could be written off
  • Payments are made in instalments over a period of up to five years
  • Directors can restructure and cut costs FAST with no immediate cash cost to the business. This includes:
    • Reduce or terminate expensive property leases, renegotiating rental fees and capping dilapidation costs
    • Cancelling onerous finance agreements such as car leases, equipment finance contracts
    • Reduce staffing costs making staff redundant - the Government has a legal obligation to pay immediate redundancy costs via the Redundancy Payment Office with no immediate cash cost to the business.
    • You can terminate Directors Service Contracts
Terminate those loss making and onerous customer and supplier contracts and obligations
  • CVAs offer significant cost savings compared to other insolvency tools
  • The CVA can be paid off early if cash flow improves
  • The CVA can be renegotiated or extended if the cash flow situation gets worse
  • The business continues to trade under the control of its directors

Why a CVA organised by 4R Business Recovery?

For a CVA to be successful it has to strike the right balance and represent a better outcome to Creditors than the alternatives like a Creditors Voluntary Liquidation.  It needs to be fair to both the Company and its Creditors.

The sad fact is that a lot of CVA fail and eventually end up in liquidation.  A key goal of the Enterprise Act of 2002 was to develop a rescue and restructure culture in the UK and save businesses.  Many Insolvency Practitioners do not have the resources or desire to get involved the business turnaround process.  4R believe that our clients need support to ensure that moving forward they are successful and that the CVA work, so we work with our clients over the long term.  Remember we need the support of the unsecured creditors to secure the vote for your CVA, so our track record counts, if we secure over 90% of the CVA proposals we submit it is because a high percentage of our CVA are successful for all stakeholders be they shareholders, directors, HMRC, suppliers or employees

Get in touch today on 0800 0385 140 and let us show you why so many others have and will continue to use the service we provide.

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