Save your business and keep trading with a CVA

Did you know...
A Company Voluntary Arrangement (CVA) could be just what you need to get back on track.

Company Voluntary Arrangement (CVA)s were launched by the Government in 1986 to help businesses faced with serious financial problems to recover. It’s a form of insolvency that means you can stay open and, if all goes to plan, avoid liquidation.

With a CVA, you enter into a legally-binding agreement to repay your creditors a set amount every month for a predefined time period, usually 5 years. It’s important to note that only unsecured debts can be included in a CVA, so it can’t be used for business mortgage arrears or other types of secured loan.

Whilst a CVA is in place, your business can trade as normal and hopefully become profitable again. A key benefit is that having a CVA protects you and your fellow directors from any further action being taken by your creditors, and interest and charges on your debts will be frozen.

If you owe more than £15,000 in unsecured debts to multiple lenders, a CVA is a potential option for your business. However, you must have the means to make monthly payments, with each creditor needing to agree how much you’ll repay.

A CVA must be set up and managed by a Licensed Insolvency Practitioner (IP), such as Clark Oliver, who’ll act as Supervisor. Your IP will liaise with your creditors on your behalf to agree monthly payment amounts that you can afford. If the creditors agree to these proposals, a repayment schedule will be drawn up and your IP will collect and distribute the monthly payments on your behalf. You’ll need to pay your IP for providing this service, but their fees will normally be subsumed within your repayment amounts.

The total amount repaid over the life of the CVA could be the full amount of the debt or a proportion of it, depending on what’s agreed with your creditors. If any debt is still outstanding at the end and you’ve made all your payments on time, the remaining balances will be written off and you’ll be debt-free. This is another major advantage of a CVA.

Why Clark Oliver

Our team of business debt specialists have wide experience of agreeing and overseeing CVAs. As expert negotiators, you can rely on us to help you create viable repayment proposals that you can afford and which your creditors are likely to consider.

If you appoint us as your IP, we’ll start by working with you to produce cash flow forecasts for your business. These will indicate how much money you can afford to give each of your, which will form the basis of your CVA proposals.

The Advantages of a CVA

There are many benefits of a CVA including:

• You don’t need to pay your IP upfront. As noted above, their fees are normally deducted from the monthly payment amounts which are then distributed to your creditors on your behalf.
• No further debt recovery action can be taken against you once the CVA has been agreed. That means no County Court Judgements (CCJs) and no winding-up petitions. Any pending legal action must be cancelled and your unsecured creditors will no longer be allowed to contact you directly, alleviating some of the pressure of being in debt.
• Your business should start to recover when the CVA is in place and you’ll hopefully see an improvement in cash flow.
• Instead of juggling multiple payments to different creditors, you only need to make one monthly payment to your Supervisor. They’ll then distribute it on your behalf.
• As soon as your CVA has been agreed, interest and charges will stop accruing on your unsecured debts.
• If you stick to the terms of the CVA, any monies you owe at the end of the agreed time period will be cancelled. This includes debts and arrears owed to HMRC.

How a Company Voluntary Arrangement (CVA) Works

This is what will happen if you appoint Clark Oliver (or another IP) to set up and supervise your CVA.

1. Assessing your Circumstances
   

   When we’ve collected all the information we need from you during our free initial consultation, we’ll discuss whether a CVA is the right way forward for your business. There may be other options which are more suitable, especially if you have secured debts.

2. Appointing a Supervisor
   

   If you decide to proceed with a CVA, you’ll formally appoint Clark Oliver as Nominee. This gives us authority to set up your CVA and, if it’s approved, act as its Supervisor from start to finish.

3. Creating Draft Proposals
   

   Once appointed, we’ll draw up repayment proposals to be presented to your creditors. Your directors will need to look over these carefully and make any necessary changes. It’s important to note that the proposals must be realistic and your business must be able to afford to pay the projected repayment amount every month for up to five years. If you or your IP don’t feel confident about this, the proposals cannot be presented and we may need to consider a different course of action to deal with your debts.

4. Presenting the CVA Proposals to County Court
   

   If everyone agrees that the proposals are workable, a final draft is written up and filed at your local County Court. A signed copy is also sent to each of your creditors to consider. This must be done at least 3 weeks in advance of the creditors’ meeting taking place.

5. Holding the Creditors’ and Shareholders’ Meetings
   

   As your Nominee, we’ll arrange a meeting for all your unsecured creditors on your behalf. Usually, the creditors don’t attend in person. Instead, they’ll either send a representative or submit their vote for or against the CVA proposals via a proxy form

   During the meeting, we’ll formally present the proposals to the creditors or their representatives, who can then ask questions or ask for changes to be made. A meeting of your company’s shareholders will be held at the same time and for the same purpose.

6. Approving or Rejecting the CVA
   

   At least 75% of more of your unsecured creditors (in terms of amounts owed) must vote in favour of the CVA proposals for it to go ahead. The same 75% rule applies if any changes are requested. It can be a worrying time if there’s a risk that the proposals could be rejected. However, we’ll do our best to secure a positive outcome by taking the time to create realistic and affordable proposals that are more likely to be accepted, and keeping in touch with your creditors in the run-up to the meeting. For shareholder approval, you’ll need votes in favour of the CVA from at least half of them.

7. Issuing the Chairperson’s Report
   

   If your CVA is approved, we’ll become your Supervisor instead of Nominee. As Chairperson of the creditors’ and shareholders’ meetings, our next task is to send out a report to all your creditors within four days. The report must also go to the County Court. It will summarise the meeting in terms of who attended, what was agreed and how each individual creditor voted.

8. Stopping any Legal Action
   

   Any pending legal proceedings against your business in relation to unsecured debts included in the CVA must now be stopped. No further recovery action can be taken against you, unless you breach the conditions of the arrangement.

9. Making your Monthly Repayments
   

   A special trust account will be set up into which your CVA repayments will be made. If you make all your contributions on time, you can keep trading as normal with no more worries about being hassled by unsecured creditors. However, if you miss any payments or consistently pay late, you’ll be in breach of your CVA. Should this happen, we as your Supervisor will be legally obliged to issue a winding-up petition against your business which will probably lead to Compulsory Liquidation.