A CVA is a formal agreement between the company and its creditors. This agreement allows you as the director to keep control of the company and continue trading.
The particulars of each CVA will differ depending upon the company’s circumstances, but the essence is that all or part of the company’s debt will be repaid over a period of time from the future trading profits (or capital realisations) of the company as cash flow allows. It may be that not all debts will have to be repaid, but only a certain percentage. This may be acceptable to creditors as the CVA may offer more to the creditors in the long term than if the company was placed into liquidation.
The benefits of entering into a CVA:
- ● Protection from creditors.
- ● Protection from a winding up petition.
- ● Avoids liquidation.
- ● Can ensure the survival of the company.