Company Voluntary Arrangement (CVA) Advantages and Disadvantages

Advantages of a CVA

• You as a company director remain in absolute control of the day-to-day running and management of the business.
• The Supervisor will not is not investigate into the affairs of the company and unlike a liquidation the supervisor is not required to submit a report to the Disqualification Unit of the Department of Trade and Industry.
• A supervisor cannot bring fraudulent or wrongful trading actions against directors, nor can a Supervisor bring an action pursuant to S238, 239 and 212, transactions at an undervalue, preferences or misfeasance. Please refer to Directors responsibilities page within this web site.
• As a company owner/director a CVA will continue to provide you with an income.
• The existing management team are able to retains control of the business
• A percentage of the debt is usually forgiven or rescinded
• The company's debts are spread over a period of time
• Less uncertainty for customers, suppliers and employees than liquidation or administration
• May be used to facilitate a restructuring programme - redundancy costs etc. are normally met by the National Insurance Fund (who rank as a creditor in the arrangement)
• Could be used to end onerous agreements and contracts - e.g. expensive leases
• Not all creditors need to agree to a CVA
• Binding on all unsecured creditors including HMRC.
• Creditors are prevented from legal action such as issuing a Winding Up Pettition

CVA Disadvantages

• The company's credit rating will be affected
• Failure by the company to adhere to the terms of the CVA could eventually result in the company being placed into Liquidation or Administration
• The company is normally be prohibited from making dividend distributions to shareholders
• Often directors and other related parties are required to postpone any payment of amounts owed until after the CVA has completed successfully.

CVA Myths

• Your company will not be able to obtain supplies;
• HMRC do not accept CVA proposals;
• Funders will not support the business through the CVA;
• Creditors and Suppliers normally object to CVA proposals; and
• The vast majority of CVAs fail.

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Read More on Company Voluntary Arrangement

Links to other pages within expresstaxsolutions.com which are related to Company Voluntary Arrangement:

• Company Voluntary Arrangement
• CVA Process
• Flow Chart
• Company Voluntary Arrangement FAQ's
• Company Voluntary Arrangement Case Studies