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.

For many companies, there are a number of benefits to choosing a Company Voluntary Arrangement as the way to resolve their debt issues. This formal arrangement covers the amount of debt that is to be repaid and the length of time it will take to repay it, and can be the best solution for all parties, as long as terms of the Arrangement are adhered to.

Company Voluntary Arrangements are often the preferred option for businesses in trouble, because they will still be able to operate, as long as they comply with the terms of the CVA. How much money they have to repay could also be less than the full debt, and the CVA is a better option for creditors than liquidation, where they might actually recoup a significantly smaller amount of the money owed to them. A Company Voluntary Arrangement also means there will be no additional action taken by creditors to recover their money, as long as the company meets the terms of the Arrangement. A CVA is also a much less expensive than if the company chose to go into Receivership or Administration.

A business needs at least 75% of the people it owes money, to agree to a Company Voluntary Arrangement for it to become a legally binding arrangement. Once this happens, the other 25% of creditors are also covered by the Arrangement, whether they voted for it or not. A CVA needs to be a fair offer to creditors, to pay back as much as is possible, while still ensuring the long-term viability of a business. This is why it is important to try and make sure a Company Voluntary Arrangement works for all parties.

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.

Technorati Tags: business, company voluntary arrangement, Debt, finance

Leave a Reply

Name (required)

Mail (will not be published) (required)

Website

Comments

Type the numbers you see in the picture below: