Company voluntary arrangements
Your questions answered
A Company Voluntary Arrangement (CVA) is an agreement between the debtors (those who owe money) and the creditors (those to who money is owed) to deal with insolvency.
Read our FAQs below to find out more.
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Company voluntary arrangements FAQ
A Company Voluntary Arrangement (CVA) is an agreement between the debtors (those who owe money) and the creditors (those to whom money is owed) to deal with a company’s outstanding debt.
Company Voluntary Arrangements allow debt to be paid over a fixed period, and allow a company to continue trading. The CVA is particularly useful for companies that are still able to generate revenue but have run into issues surrounding debt. For a CVA to work, an agreement must be made regarding the total amount of debt to be paid to the creditors. Usually, the debt is reduced so that payments can be made regularly, or the period in which the debt is due is extended. The terms outlined in a CVA must be agreed upon by at least 75% of the total creditors.
At Boardroom Punks, we aim for no-nonsense explanations so you can choose the best financial solution for your SME. Read on for answers to your most frequently asked questions.
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Company voluntary arrangements FAQ - The Punk way
How much do company voluntary arrangements cost?
There is a broad range in terms of the cost of a CVA. Usually, the average cost of CVA falls between £3000 to £10,000. Many different factors will determine the total cost of a CVA. These include the total amount of creditors that money is owed to, the volume of outstanding debt, the position of HMRC and the bank or building society, and the negotiations needed. Getting to the bottom of a CVA requires clear discussions between the stakeholders of a business and the creditors. We are readily available to fight in your corner.
What is the cva process?
A CVA looks to reorganise the payment of a debt to creditors. For agreements to be made on a CVA, there are a few things to bear in mind. Firstly, there must be an agreement regarding the timeframe. Most CVAs are paid over a 3-5 year time span. However, depending on the level of debt and the number of creditors that are owed money, this could be either shorter or longer. Secondly, the other important discussion is the total debt to be paid to the creditors. Depending on the trading ability of a company and its ability to stick to the terms agreed in the CVA, some of the debt may be wiped off. If the debtors negotiate well with the creditors, then total debt can be broken down into manageable payments. We work with SMEs to find the most suitable arrangements with time and total debt.
How do I apply for a company voluntary arrangement?
To apply for a CVA, the company directors or members of a company must agree that this is the most appropriate solution. A CVA is administered by an insolvency practitioner as they are the ones who will mediate the discussions between the debtors and the creditors. The appointed insolvency practitioner must come to an arrangement within a month of being appointed. Boardroom Punks work with the incentive of salvaging your SME, so you can be assured that all options will be explored on our end during the negotiation process.
What do I need in place to get a company voluntary arrangement?
First and foremost, you must understand how much debt is owed to the creditors and an appropriate timeframe in mind to pay back the debt. Secondly, you should have a reputable business turnaround specialist company like Boardroom Punks to fight in your corner. Finally, you must have proof to show that you can stick to the CVA once it is agreed upon by both parties. If you can show that your company can still generate revenue and stick to the fixed timeframe, then you have a very good chance of securing a CVA that can help your company survive in the long run.
What role does HMRC have in a company voluntary arrangement?
HM Revenue and Customs (HMRC) is directly responsible for collecting tax and debt, paying state support, and administering the national wage. Their job during the CVA is to ensure that the arranged debt is paid accordingly within the new payment structure. The HMRC is also responsible for putting the final stamp of approval on any CVA. Once an agreement is found between the debtors and creditors, the HMRC will review the CVA and decide if it is feasible. The biggest point of contention for the HMRC is to judge whether the company is still viable. If an SME can still make money, pay the debts accordingly, and stabilise in the future, then it is very likely that they will approve of the CVA. On the other hand, if there has been a long record of financial mismanagement and a history of tax arrears, then the HMRC may not approve of the CVA.
How long does it take to make a CVA proposal?
Once you and your board of directors decide to inquire about a CVA, a licensed insolvency practitioner has one month to come to an agreement with the creditors. After this period, a creditors meeting will take place in order to seal the deal. This usually takes around three weeks to complete, and it is during this time that HMRC will formally agree upon the proposed CVA. In total, it takes six to eight weeks for the CVA proposal to be completed. At Boardroom Punks, we act with lightning efficiency so you can get your SME back to health. The effectiveness of the CVA relies upon a company getting back to a position so it can generate income. With our innovative aims and alternative approach, we can assure you that everything will be done so this can be achieved.
What happens if my CVA proposal is rejected?
Your CVA may be rejected if 75% of the creditors do not agree to the proposals or HMRC does not formally agree upon the payment structure. In these scenarios, Boardroom Punks will strive to find alternatives for your business. Some of the solutions include administration and pre-pack administration.
Though this may help the company to survive in the long term, the change in personnel may change how the company works. Another alternative is a CVL (Creditor Voluntary Liquidation). If a CVL is agreed upon, your business will be liquidated, and a large some of that money will be handed over to the CVA creditors to cover the debts. Of course, none of these solutions are ideal, but we will sit down with you to find specific ways of salvaging your business. It may take time, but you have experts at hand in Boardroom Punks to guide you through the process.
What happens if the debtor (the person or company that owes money) does not comply with the terms of the company voluntary arrangement?
It is unlikely that a CVA will fail because of the many requirements needed to secure an agreement in the first place. However, in business, things can always change direction unexpectedly. If your company cannot abide by the structure or agreements made in a CVA, then the debt is no longer bound to the contractual obligations. Because of this, the debt will begin to accumulate interest over time, meaning the debt will grow outside of your means to pay. Depending on the circumstances underlying why there has been a breach of the CVA, you may be able to agree upon a varied agreement with the creditors. With each CVA, you will be appointed a supervisor to oversee the payments. For instance, there may have been some form of accident that has temporarily stopped the businesses from running for a couple of months. These issues are to be discussed in length with your CVA supervisor. The other problem lies with HMRC, as they do not anticipate a change in the agreement for at least 12 months. In the case that something has hampered the CVA, then you must present firm evidence to HMRC outlining the reasons behind the complications with the terms and the ability to come to a new agreement.
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