When a company is in financial trouble there seems to be a main direction that directors turn to; liquidation. However depending on the circumstances there are a few business rescue alternatives that may suit the situation better.
The CVA (creditors’ voluntary arrangement) option provides a realistic alternative to liquidation for an insolvent company. This process gives directors an option of trading out of a difficult period to help with future profitability.
Below there are 8 key facts that all directors should know about the CVA option:
- There is no mandatory repayment time frame or repayment amount
- Following successful completion of the CVA the balance of debt not repaid through the CVA is written off
- The company remains under the control of the directors
- HM Revenue & Customs has a very high success rate for CVA acceptances
- A company needs only 75% of creditors’ to agree for a CVA to be approved
- The company is allowed to continue trading throughout a CVA
- To get the creditors’ approval you must show them how a CVA is more beneficial to them then the alternatives
- There is less focus on directors during a CVA and no investigations are made or submitted to the Insolvency Service
These facts highlight the key features of a CVA in which a director should be aware of when considering all the options available to insolvent and struggling companies.
This information was brought to you by F A Simms & Partners who specialise in advising and supporting on all business rescue matters. For more information regarding the content of this article please contact FA Simms & Partners today on 0845 072 2500 or email [email protected]
By Jo Nockels
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