Company Voluntary Arrangement: A quick Guide

Posted by Vidit Agarwal on May 11th, 2018

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.

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?