Company Voluntary Arrangement: A quick Guide

Finance & Investment

Jul 13, 2018

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Company Voluntary Arrangement (CVA) can be used to renegotiate the terms and amounts of company debt and repay them over a period of up to three to five years.

What is a Company Voluntary Arrangement (CVA)?

The Company Voluntary Arrangement is also known as CVA in UK provides a way for companies with its creditors regarding repayment of full or a part of its debts over a fixed period of time, and offers the opportunity to address issues surrounding management and operational systems that were not working.

A Company Voluntary Arrangement is a legally binding agreement with your company's creditors to allow a proportion of its debts to be paid back over time. The proposal gets 75% of votes from the creditors, who voted need to support the proposal. CVA is a formal deal between an insolvent business and its creditors (lenders), usually for three to five years.

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What are the Advantages of a Company Voluntary Arrangement (CVA)?

It is a flexible so creditors see a better return.
Debt repayments are consolidated into one single payment.
Can freeze interest and charges.
Stops pressure from VAT, PAYE and tax payments
Legally-binding tool that offers protection from creditors.
Terminates employment and supply contracts.

However there are also Disadvantages of Company Voluntary Arrangement (CVA)

Some creditors may dislike the length of time that a CVA takes.
The company has no credit rating, so this can difficult to run with current supplier.
Obtaining agreement from the bank may be challenging.
The proposal is then filed at court, where it is printed and sent out to all creditors.

For any further information about the CVA, you can explore here what is a Company Voluntary Arrangement?

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