Company Voluntary Arrangement (CVA) & Liquidation Advice

A company voluntary arrangement (CVA) is a formal agreement with all your creditors to deal with the company debts.

Who is it for?

      • If the company can’t pay its debts as and when they fall due, but can make a profit and make monthly payments to repay its debts
      • The directors remain in control of the business

What's the process?

      • At our initial meeting we may suggest a CVA is a way forward and offer you advice on the whole process
      • We will work with you to prepare a proposal to your creditors that will see them being paid some or all of their debt over time
      • Typically a CVA lasts for 5 years and the company makes monthly contributions to an insolvency practitioner, known as a supervisor
      • The supervisor makes sure that the company sticks to the proposals and makes payments to creditors
      • To enter into a CVA requires your creditors to approve the arrangement by way of voting on the proposals that we send to them
      • You need 75% of the creditors that vote to vote in favour to approve it, but if they do this will bind all of the creditors – even those that did not vote
      • Depending on your circumstances a CVA would normally be acceptable at 25p-100p in the £

Anything else I should know?

      • If the directors or related parties are creditors you count in the 75% of creditors needed to approve it – but if this is the case there is an additional test, 50% of non-associated creditors need to vote for it
      • You may also be able to use it as a way to wind down the business while remaining in control
      • CVAs have a high failure rate and while they may seem like a good idea at the time, there are many potential problems. Sometimes a liquidation is better
Chris McKay, insolvency Practitioner in Cambridge

Chris McKay

Licensed Insolvency Practitioner in Cambridge & Peterborough

Linkedin-in

Please get in touch. We don’t charge for an initial meeting and we are always happy to chat. Call me on 01223 803445, email or click the chat button

Advantages and Disadvantages

Advantages of a CVA

  • The directors remain in control of the business
  • As the company remains trading most of its licences/contracts will remain in place
  • The business can still use the cash and debtors to fund the business
  • There is no statutory investigation by the supervisor

Disadvantages of a CVA

  • The arrangement requires the approval of creditors
  • It may still trigger personal guarantees
  • Secured creditors do not normally take part
  • High failure rate
  • It normally lasts 5 years

Frequently Asked Questions

Most frequent questions and answers about a Company Voluntary Arrangement

Do I have to include all my creditors?

Yes, although it may be possible to have different proposals for different types of creditors although this is not normal. The more that creditors are treated differently, the more unlikely that the proposal will be acceptable to 75% of creditors

What happens if the CVA fails?

There will be detailed clauses in the Company Voluntary Arrangement proposal that set out what happens in the event of a failure. Usually it will mean that the Supervisor is required to put the company into liquidation

5 Years is a long time - can I pay it off early?

It is possible to pay it off early but it will depend on the circumstances. If the company has had a good year, it is likely that it will be required to pay in bonus contributions anyway rather than use it to accelerate the payments. If a lump sum becomes available, perhaps from outside the business that could be attractive to creditors

I have too many employees and need to make some redundant - how does the CVA deal with that?

Going into Company Voluntary Arrangement does allow employees to be made redundant and their redundancy and notice pay is paid by the Redundancy payments service who then stand as a creditor in their place