Company Voluntary Arrangement
The Perfect Answer
If you have a good business which is being held back by old debts or perhaps you have a Time to Pay agreement with HM Revenue & Customs but it's now unravelling and the pressure is building, why not freeze all of your debts and pay them off over 5 years through a CVA procedure?
This can be achieved by implementing a Company Voluntary Arrangement, an inexpensive, contractual deal agreed with the creditors, monitored by the Courts and overseen by a licensed Supervisor who’s there to make sure that the deal works. You stay in control of your company which continues trading on, there are no liquidators to give you a hard time and creditors will agree an easy payment plan over 5 years. Depending on how much is owed and who it’s owed to you may actually get a discount of between 30% and 75%, on what you pay back.
How does it work?
Your Company is under financial pressure but is still viable if you can get that pressure off.
You don’t want to liquidate or administrate your Company as that would jeopardise the business and its assets and you feel an obligation to the suppliers and customers to find an alternative way forward
A Company Voluntary Arrangement then becomes the perfect answer so how does a CVA work?
- First, with the benefit of informed advice from Impetus Recovery the directors decide that a CVA is the right thing for the Company.
- A full and detailed proposal document is prepared which explains why the Company is in difficulty and which makes an offer to all creditors to partly or fully pay them off. Typically payment of between 25% and 100% of debt is offered to creditors payable in monthly contributions over a period of up to 5 years.
- A licensed Nominee comments in writing on the viability of the Company’s offer and his comments are added to the proposal document which is then sent to the creditors for them to consider.
- The creditors vote on the Company’s offer either in writing or at a meeting and if three quarters of the value of the creditors who vote accept the offer it becomes binding on all creditors and the company enters into a CVA. In reality HM Revenue & Customs will usually be owed more than any other creditor so if they vote for the CVA it will be accepted even if other creditors vote against. A reasonable offer will almost always secure their support.
- From the Company’s decision to apply for a CVA to the final vote takes approximately one month and, if there are bailiffs hovering, a Court moratorium can be applied for which will stop any further action during the process.
What does it cost?
All fees and costs, with the exception of our own fee, are payable by the CVA creditors out of the up to five years worth of contributions paid into the CVA by the Company.
After we become involved creditors claims are frozen by agreement or by Court Moratorium while the CVA process develops and therefore cash flow opens up sufficiently to pay us our fee.
Our fee will be agreed at the outset and will reflect the complexity of what we are engaged to deliver. However any initial consultation will be completely free and will result in a firm no obligation quotation for managing the project which will be discussed and agreed between us before any fee is paid.
One of our experienced Consultants will be happy to talk you through the CVA process so give us a call or complete and submit the CONTACT form elsewhere on this website and we’ll be happy to meet you.
Received a winding up petition?
If you have received a winding up petition you will be able to get the hearing adjourned and in time dismissed if you propose a Company Voluntary Arrangement which is likely to be acceptable to creditors.
The dismissal of the petition will then give you back control of the company having cut a deal with creditors to pay some or all of their debts over a period of up to 5 years.
If you engage us to assist the process is then as follows:
- We will approach the petitioning creditor to request an adjournment of the hearing of the winding up petition for a period of eight weeks while a CVA offer is prepared which will deal with all of the company’s debts. If the petitioning creditor is HM Revenue & Customs and this is the first hearing then they will almost always agree to an adjournment as long as the company is represented in Court at the hearing.
- complying with the Liquidator’s or Administrator’s requests and;
- If the petitioning creditor agrees to an adjournment we will arrange for barrister representation at the hearing to disclose this agreement to the Court. The hearing will then be adjourned;
- If the petitioning creditor does not agree to an adjournment the barrister will instead argue the case at the hearing. If it is the first hearing of the petition the application for an adjournment is very likely to succeed, whatever the views of the petitioning creditor;
- In essence, although there are no guarantees, we would usually expect to obtain an adjournment of the hearing of a petition, whether or not the petitioning creditor is in agreement, for a period of time of up to eight weeks while a CVA is being prepared and considered;
- During that period, if required, application can also be made for a Validation Order to unfreeze the bank account and allow trading to continue;
- Once the hearing is adjourned a meeting of creditors will be convened in order for the creditors to consider and vote on the acceptance or rejection of the CVA offer and, if three quarters or more of the unrelated creditors who vote accept, the CVA will be passed and the winding up petition will be dismissed;
- You are then back in control of your company and able to make decisions again without the constraints of the winding up petition.