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If you own a company that is heading towards
insolvency unable to pay your bills, you should seek
insolvency advice from a regulated solicitor.
In order to avoid bankruptcy Corporate Voluntary
Arrangement or CVA may be a possible solution.
This page deals with CVAs We have discussed
Individual Voluntary Arrangements (IVA's) here A
CVA is an agreement between a "debtor" (the person OR
company with the debt) and their "creditors" (those to
whom money is owed).
The purpose of the agreement is to avoid having to
bankrupt an individual or company in order to recover
debts. Instead the CVA allows the debtor to avoid
bankruptcy and repay a proportion of the debt over a
fixed period.
It may be that Bankruptcy cannot be averted but you
should seek appropriate advice before it is too late.
Click here for more on
bankruptcy.
Advantages of entering into an CVA:
You can retain assets such as property - but may need
to take out loans on the capital to use as a makeweight.
Whatever you or your co-directors / partners can bring
to the table will help convince creditors that the CVA
is a viable solution.
Capital may need to be re-financed unless you can
convince your creditors that you can otherwise meet your
obligations.
A voluntary arrangement for a company works in very
similar way to an individual Voluntary arrangement
(IVA).
The benefits are also similar and can include:
Little or no restrictions obtaining further personal
credit although in reality such credit might prove
difficult to obtain.
The CVA proposals are drawn up by the Debtor and are
flexible to accommodate personal circumstances or
business needs.
There is no publicity such as a bankruptcy notice in
the local press.
The costs of administering CVA's may be considerably
lower than in bankruptcy this will mean a higher return
to creditors.
CVA's are classified as an insolvency procedure and
as such creditors can reclaim tax and VAT relief as a
"bad debt".
Finally, a sole trader or Partner in a business can
continue to trade and generate income towards repayment
to creditors which would otherwise not be possible
through bankruptcy or would require the sale of key
assets.
Disadvantages of entering into an CVA:
The period of the CVA is generally between 3-5 years
and does involve repayment of credit and management /
set up fees.
By opting for bankruptcy, the slate can be wiped
clean in a shorter period. You are still at risk of
losing your assets if you breach the agreement.
The creditors can resume bankruptcy proceedings.
The creditors miss the opportunity for a Trustee
(appointed during bankruptcy proceedings) to investigate
the actions of the Debtor or possibility of hidden
assets.
BEWARE - the
high level of fees chargeable has led to a dramatic
increase in CVAs in the UK. Make sure the CVA is the
best deal for you and not simply the best deal for your
advisor.
The Debt Connection - UK Insolvency Solicitors -
Bankruptcy and IVA specialists. Offering advice
Nationwide - London, Birmingham, Manchester, Leeds,
Newcastle, Nottingham, Bristol, Cardiff, Leicester,
Bradford and many more locations
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