Updated: 5th February 2020
Knowing how best to deal with serious debt problems and financial distress as a company director is not easy. Company Voluntary Arrangements are one of the most frequently used insolvency solutions and Real Business Rescue has extensive expertise on the subject. Watch the video below for a brief overview of the key issues.
Every day we are contacted by company directors who are fearful because company debts have spiralled out of control and they don’t know how to repay them. One or more creditors may be threatening to wind up the company or there might not be adequate cash flow to meet demands such as payroll and paying invoices.
In this situation, a Company Voluntary Arrangement can be an effective solution.
Known more commonly as a CVA, it is a legally binding agreement between the company and its creditors where a proportion of the debts are repaid over a fixed period of time – typically monthly contributions to the CVA supervisor. Alternatively the Company may look to sell assets and repay creditors from the proceeds. Whatever agreement is put in place, all parties are contractually bound to adhere to the terms and conditions agreed.
Creditors need reassurance that projections of repayment are achievable and at least 75% of these creditors will need to agree to the CVA for it to be approved. HMRC actively participate where a CVA is being proposed and they will not accept unrealistic projections.
Where the company proposes to make monthly contributions from income, it is clearly important that it is able to afford them. Creditors are usually willing to support a CVA, even though they’re unlikely to recover all that they are owed, as an alternative solution such as company liquidation would see them receive significantly less.
As licensed insolvency practitioners, we can help to ensure that the repayment model is viable. We have worked with thousands of distressed companies and we understand that being pursued for unpaid debts is a hugely stressful time and equally recognise that creditors simply want to be paid.
So, if your business is potentially viable but struggling with cash-flow problems or facing threats from creditors, a Company Voluntary Arrangement could help bring an end to creditor pressure and turnaround your company.