Company Voluntary Arrangements
CVA vs Pre-pack
Once a business is in a turnaround finance situation, the management will be faced with a few stark finance choices, Company Voluntary Arrangement or a Pre-pack. The most obvious ones are either to put the company into liquidation and just walk away, or if there is a means of raising funds, to repurchase the important parts of the business from the liquidator and start again (commonly referred to as a Pre-pack).
The main disadvantages (to the Creditors) of a Pre-pack are that, unless the liquidated business had substantial assets, unsecured creditors are likely to get very little of their debt repaid, if anything. However, the assets of the business that are worth saving are likely to be available at what is effectively a discounted price. Thus a new, debt-free business can be set up at a relatively low cost.
The down side is that there are likely to be some very unhappy creditors?
There may however be one other solution. One that may be slightly less well known to some business managers. This is to apply for a Company Voluntary Arrangement (CVA)
What is a Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement (CVA) is a legally binding arrangement between a company and its creditors to repay them over a period of time.
- Enables the company to continue in business with a view to improving the position of the creditors
- Stops court action and winding up procedures
- Eases cash flow pressures
- Directors are allowed to remain
- Greater flexibility allowed to ensure that the return to creditors is maximised
If a company has a viable future, but current cash flow problems have resulted in mounting pressure, a CVA may be a good solution. BFS can offer this option to distressed businesses through its close connections with OPUS Restructuring Llp.
For more details on Company Voluntary Arrangements and how we can help, please call us on 0800 093 5240 FREE or e-mail us at email@example.com