What Is CVA Insolvency In Business?

A company voluntary arrangement (CVA) is an insolvency procedure that gives your business the chance of recovery. It’s a tool for business rescue like no other insolvency procedure and can deliver a better outcome to unsecured creditors when compared with administration or liquidation.

Your directors will work with an insolvency practitioner to put together a feasible proposal that creditors will approve. It’ll contain information about your company’s circumstances, details of your cva insolvency contributions and the business’ future moving forward.

What Is A CVA?

A CVA is an insolvency process that allows a business to ring-fence its assets and negotiate repayment of debts over 3 to 5 years. It is enshrined in law (Part 1 of the Insolvency Act 1986) and provides a viable business with the opportunity to repay its debts while retaining its status as a going concern.

The CVA process begins with a professional assessment of your business and its financial situation. This will then be used to determine whether or not a CVA is right for your company.

Next, an IP will work with you to prepare a draft proposal which will be presented to creditors. It will need to be fit, fair and feasible.

How Do You Know If Your Company Is Insolvent?

If your business is struggling to pay its debts, it may be insolvent. There are a number of ways to identify whether or not a company is insolvent, including checking its balance sheet and income statement.

Another way to check is to see if the business has received a winding-up petition or a county court judgment (CCJ). These are signs that the business is in trouble and may be insolvent.

Alternatively, you can use our free insolvency test to gauge your company’s current situation. The test asks you to check if your company can pay its debts when they fall due, and if the value of your assets exceeds your liabilities.

What Happens After CVA Approval?

Once a CVA is approved, it becomes legally binding on the company and its creditors. This means the company cannot continue trading unless the terms of the CVA are met, and creditor pressure is halted while the business attempts to repay its debts.

A CVA can be a useful way of resolving an insolvency problem for the company. It gives the directors time to implement a plan that will help the company turn its fortunes around and come out the other side of the insolvency process stronger and more profitable.

The main benefit is that it stops the company from falling into a terminal insolvency position (such as liquidation) and gives directors time to prepare an alternative strategy. It also enables the company to regain control and continue operating as a going concern, without losing employees or their rights.