A number of businesses experience financial trouble every now and again, some companies worse than others. A number of businesses go bankrupt before they realize that there is another option. This option is called a Company Voluntary Arrangement. Also known as a CVA, it is a contract deal between the financially troubled business and its creditors. The idea of it is to preserve the business and return it back to profitability. If the potential is there to resurrect a certain business, a CVA is a dynamite solution rather than go bust.
A CVA is set up to where the business can pay back debts with future profits while restoring sales. The owners of the company still remain in control and no personal guarantees are brought into place. Before one can get started with a CVA, they must believe that their business can come back and be successful. A CVA is written out only when the legal CVA writer and directors of the company meet, usually at the site of the company. From here, the CVA writer, or insolvency practitioner (IP), and the owners agree on terms of the CVA and make changes to the company itself. Changes differ from being slight to major. The CVA is then sent to the county court to be filed before being sent to all of the creditors. A 75% in favor by the creditors is required and a 50% in favor by the shareholders of the business is required before the CVA can take affect. After this period of time monthly installments are paid and eventually the company comes out of debt.
A CVA is a solution for companies that believe they can be profitable again. It’s for those businesses that want to give it another shot instead of going bankrupt. Before one decides to throw in the towel, consider a CVA and give your company another chance to succeed.