Company Voluntary Arrangement FAQs
As a Director of my Company, can I propose a CVA – Company Voluntary Arrangement?
A CVA may be proposed by the directors of a company.
How long does it take to set up a CVA – Company Voluntary Arrangement?
About 5 weeks if all of the required information is available. However, we can give reassurance to the creditors during the preparation process.
Who controls my Company in a CVA – Company Voluntary Arrangement?
You do. As a Director you would remain in control of your company.
What are the advantages of proposing a CVA – Company Voluntary Arrangement?
You can use existing Company assets and future trade to stay in business.
What happens if my company can’t make the contributions every month?
The company can consider a variation due to a change in circumstances. However if a default occurs under a CVA, most CVA proposals contain a provision obliging a supervisor to petition for Winding-Up. A CVA is therefore an opportunity to pay all debts (usually for a reduced amount), but there are safeguards for the creditors in the event that default occurs.
Is a CVA – Company Voluntary Arrangement like an IVA?
Yes, a CVA is similar to an IVA, but for companies rather than individuals.
Who can I put into a CVA – Company Voluntary Arrangement?
All unsecured creditors at the date of the CVA meeting. That includes all HMRC debt, trade creditors, H.P. and Leasing creditors (if the goods are to be returned), rates, unsecured loans, unsecured banking debts and any required redundancies.
Will my Creditors agree to a CVA – Company Voluntary Arrangement?
Creditors do support CVAs if the alternative is liquidation with little or no return to creditors. The Proposal must, however, be reasonable and achievable.
Do I have to put all my Suppliers that I owe money to into a CVA – Company Voluntary Arrangement?
Yes if they are creditors and out of trading terms. There is a little leeway to pay certain creditors if they are within terms and essential for the survival of the business and payment is seen to be “In the Interest of the Creditors as a Whole”.
Will a CVA – Company Voluntary Arrangement stop a Winding up Petition?
Yes. Existing unsecured creditors are legally stopped from continuing enforcement action once a Company Voluntary Arrangement is approved.
What happens to my secured creditors such as my Bank?
Secured creditors do not vote in a CVA and the reduction in debt, within your company, will be beneficial for the bank as your company will be more viable and therefore be able to support bank commitments.
The rights of a secured creditor cannot be affected by a CVA without the express consent of the secured creditor.
I have money owed to me that is in a Directors Loan Account – is it safe?
All unsecured creditors, including directors loans accounts, ought to be treated equally in a CVA. However, directors loans are often excluded from the CVA and do not get repaid during the CVA.
Should I inform my customers?
There is no legal requirement for you to do so. However notice of a CVA Meeting of Creditors, and the proposals, have to be circulated to all creditors, and as such it is likely that third parties will become aware of a CVA having been proposed and eventually approved.
How is a CVA – Company Voluntary Arrangement Agreed?
A CVA requires the approval of greater than 75% of the voting creditors on the day, by value – i.e. one pound owed equals one vote. 50% of non-associated creditors, by value, must also vote in support. When approved, the CVA binds all creditors, even those that didn’t vote or voted for a rejection.
Will my suppliers support my company in a CVA – Company Voluntary Arrangement?
Generally yes, as long as they believe that they have been treated the same as all of the other creditors.
A CVA – Company Voluntary Arrangement sounds too good to be true – why is it allowed?
If you were owed money by a company that is proposing a CVA and it was your best option to accept the CVA, then you would vote for approval. The CVA scheme was originally written by HMRC in order to keep workforces in employment.
What happens after the CVA – Company Voluntary Arrangement is written?
The CVA is filed in Court and then sent to the creditors. A meeting is called and the creditors are invited to attend the meeting and vote on the CVA proposal. It is rare that creditors do attend the meeting as they have already seen the proposal and tend to send in a postal vote by completing a “proxy form”. It is a regular occurrence for CVAs to be accepted by a postal vote with no creditor attendance.
A Creditor may request modifications to the proposal, which will need to be approved by the directors of the company and a vote by the creditors.
The creditors then vote to either accept or reject the CVA. Once approved, all creditors are legally bound by the proposal and the company makes agreed contributions to the Supervisor of the CVA for the length of time stated in the proposal. A shareholders meeting is held requiring a vote in favour of the CVA Proposal.
Will the HMRC accept a CVA – Company Voluntary Arrangement?
If your returns are up to date or filed prior to the submission of the CVA proposal, the previous compliance history is ok with not too many failed promises to pay and the company does not have a previous CVA that failed, then the HMRC are likely to vote in favour.
Can anyone interfere with the running of a CVA – Company Voluntary Arrangement?
If the CVA terms are being met then the company is run by the directors without outside interference. Under the terms of a CVA the company enters into a binding contract, and must comply with the terms thereof. The role of the supervisor (a licensed insolvency practitioner) is to monitor the CVA and to ensure that the company complies, and will take appropriate action in the event of default.
How long have CVAs – Company Voluntary Arrangements been around?
A Company Voluntary Arrangement (CVA) is a very well known insolvency rescue solution and has been part of UK Insolvency law since 1986.
How should I view a CVA – Company Voluntary Arrangement?
Think of a CVA as a mechanism for giving your company more time and legal protection from creditors to sort its financial affairs out and pay creditors back often a reduced amount of their debt.
How would a Creditor view a CVA – Company Voluntary Arrangement?
Creditors will usually end up with a better financial outcome than if the business had been allowed to go into liquidation. Creditors may not like CVAs but they certainly hate the alternative!
Who will find out about a CVA – Company Voluntary Arrangement?
Under normal circumstances a Company Voluntary Arrangement is a private legal matter and the company would not attract any publicity, unless the company is a household name, such as a Football Club However, a CVA does show up on a Company Credit Report. The approval of the CVA is recorded at Companies House on the company insolvency section.
What are the costs for setting up and running a CVA – Company Voluntary Arrangement?
If the CVA is a pence in the Pound arrangement, as most are, then all the costs would be paid for out of the total funds provided in the CVA. Therefore, the costs are listed within the CVA document. In the event of a full repayment CVA we would require initial cost discussions with you, since the cost would be in addition to the funds provided for creditors.
Many Insolvency Consultants charge upfront fees – why don’t you?
We want to attract more business through recommendations. We are so confident in our abilities that we are willing to repay the trust that Clients place in us by getting paid after our success. You will then have the confidence that we will work hard to safeguard your business.
Why should I use you?
You have a choice. We would obviously prefer you to allow us to help you. We believe sincerely that there are many benefits in using our services over and above our competitors.We are the current leader in the field assisting in more CVAs than any other company.
We tier our assistance in order for you to receive a “Duty of Care” only to the stakeholders in the company.
And finally – we love what we do as we save thousands of jobs and in doing so keep families and communities together.