CVAs some common questions answered
By Richard Simms
What is the financial structure?
Typically a monthly contribution is made into the CVA, which is distributed to creditors.
Are my current creditors frozen?
Yes. Once the CVA is in place no enforcement action can be taken by pre-CVA creditors.
How long do I have to repay my creditors?
Every CVA is different and a sensible time frame should be set.
What if I can’t repay my creditors back in full?
A pence in the pound offer can be made. Remember this will ultimately need to be supported by a business forecast.
How is a CVA approved?
75% of unsecured creditors by value must approve a CVA. Remember this is 75% voting on the day. 50% of non-associated creditors by value must also vote in support.
Who controls the company?
The existing Directors and management.
What are the costs?
A Nominees fee will be charged, typically £2,000 – £3,000 depending on the business size to establish the CVA.
How long will it take to get approved?
Typically 28 days from the outset.
What happens if the company can’t make the contributions?
- Some leeway is built into the structure on timing of payments
- A proposal can be made to vary the terms of the CVA
- The Company passes into Liquidation
What happens to my secured creditors?
- Secured creditors do not vote in a CVA
- They will need to be comfortable with the CVA and will often run, as before the CVA, during the CVA
- Remember secured lenders prefer a solution not a problem
Published July 2014