Despite the most honourable intentions, it can be very easy for a company to end up in debt or with money problems. In the past, many long standing family businesses have sadly seen themselves go into liquidation as a result of credit problems. However, there is an alternative, as arranging Company Voluntary Arrangements (CVA) can be a good way to repay your creditors without your company going into liquidation. CVA’s can provide valuable breathing space as you rebuild your company and look towards a potentially brighter future. Here are some of the key reasons that companies might choose to take out a CVA.
The biggest factor of having a CVA, is that it allows you the advantage of remaining in control of your company while paying off your debt in manageable chunks. A more common outcome is for a company to go into administration, putting somebody else at the helm of all business decisions which can be rather frustrating. A CVA allows the company to operate and trade as normal throughout the recovery process. Provided all the regulations of the CVA are respected and adhered to, there is no reason that company can’t make a full recovery and become stronger than ever.
Anyone who’s been in debt will be aware of how frustrating it can be to have the constant threat of creditors, but at the same time they’re only doing their job. Taking out a CVA provides a legal barrier which prohibits creditors from chasing you for payments, because your case is being handled by a professional insolvency practitioner. In many cases, a CVA can prevent legal action that is already in progress, which could well work out to be a saving grace. The practitioner handling the company’s case can negotiate on their behalf with creditors and alternative arrangements can sometimes be agreed upon.
Any company that enters into administration are immediately named and shamed via the media and newspapers, which can be somewhat humiliating. CVA’s allow a company some much needed privacy during a difficult time as they pay off their debts and enter a recovery period. If credit issues become public knowledge that can be detrimental to business as it puts off potential customers, clients or investors, which could also create further financial issues. A CVA allows a business to trade as normal, keeping their personal affairs private, allowing the best opportunity for a stronger company at the end of the recovery process.
If a company falls into financial problems, it could well be that there are a number of underlying issues that haven’t been addressed. Undertaking a CVA allows for the time to thoroughly examine the business from top to bottom and establish any long running issues that may have caused the initially credit problems. This allows for restructuring of the business to take place and be integrated to prevent the issues from reoccurring again.