Avoid Bankruptcy With A CVA

In times of recession, it can be hard for businesses to make sure that they are making enough money to pay all their creditors. With less money coming in, and more going out, debts can soon begin to pile up. Once a business’s liabilities exceed its assets, it becomes insolvent, and action needs to be taken to ensure creditors are paid, and the business survives. One of the preferred options might be a Company Voluntary Arrangement.

A Company Voluntary Arrangement is a formal arrangement between a business and it’s creditors. It sets out how the debts are to be repaid, whether in part or in full, and over how long the repayment will take place. Once agreed, there are a number of benefits to a company of having a CVA in place, as long as they stick to the terms of the arrangement.

One of the biggest benefits of a Company Voluntary Arrangement is that, as long as the business keeps to the arrangement, they are free to continue trading. They are also given protection from any further action by creditors, which can provide the necessary breathing space to restructure the company’s finances, to help the business recover. The amount of debt could be reduced, as creditors are willing to accept part-payment instead of the possibility of receiving much less, if the company stopped trading and went into liquidation. A CVA is typically less expensive than Administration or Receivership, and makes repaying creditors easier for businesses to manage.

In order for a Company Voluntary Arrangement to be agreed, 75% of the business’s creditors need to be happy with the debt repayment proposal in the arrangement, which then means all of the company’s debts would then be covered by the arrangement. To ensure that creditors agree to a CVA, it is therefore important that a business puts forward as fair and honest a proposal as possible. It’s in the interest of the creditors and the company with the debts to make sure a CVA is agreed, and that it will work.

If your company is struggling with debt, and you think a Company Voluntary Arrangement could help you to turn your business around, it’s important you get advice from a qualified insolvency practitioner, sooner rather than later. They can advise you on CVAs as an alternative to Liquidation or Receivership, and help you work out a proposal that your creditors will agree to. Once you have the protection of a CVA in place, you can concentrate on building your business back up without the threat of any more action from your creditors.

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