A CVA is a legally binding agreement (“the proposal”) with your company’s creditors to allow a proportion of its debts to be paid back over time.
Once the proposal has been approved, the unsecured creditors are bound by the arrangement. The company can carry on trading as usual, and the directors remain in control. The CVA is monitored by a supervisor who has to be a licensed insolvency practitioner. The arrangement usually lasts for 2-5 years but is unique to each situation.
A CVA is the best rescue tool for a company that is viable going forward but has historic debt. The directors remain in control and are able to trade out of their current financial problems provided that they have addressed the issues that caused the debts in the first place.
Entering into a CVA isn’t free, but compared to most other insolvency solutions it’s relatively affordable. A CVA also typically offers a better deal for a company and its creditors by ensuring creditors receive at least some of what they are owed.
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