Anyone running a company is usually focused on generating profits for its investors. However, sometimes things do not go as expected. You may find your business in large debts due to both internal and external factors.
There are various options you can pursue to get your organization on the path to financial recovery. A Company Voluntary Arrangement (cva) is one of the options you can pursue. Through this arrangement, you organization can be able to pay off its debt over a fixed period of time. Moreover, while the debts are being paid, you will have the opportunity to address issues related to operational challenges that may have led to the debts.
Like is the case with all financial restructuring options, it is important to consult a financial advisor before implementing company voluntary arrangement. The advisor will help you understand how a CVA is implemented and its impact on the business. You should inquire about the advantages and disadvantages of a CVA to find out whether it would be the right option for your business.
The major advantages of a CVA arrangement are:
i)The directors remain in the company
Sometimes, your company's financial woes may have been contributed by the management style. However, despite this, the management can play an important role in making the CVA successful. You will need the directors to ensure the continuity of the business processes as the restructuring is going on. The management knows the "ins" and "outs" of the organization and their support will be important in the recovery of the company. Your company can quickly overcome its financial challenges when a financial advisor is brought on board and the directors are retained during the CVA implementation.
ii) Keep costs down
High costs can impede your company's quest to get back on its feet financially. Compared to other restructuring options such as receivership and insolvency, setting up a CAV arrangement and managing it is affordable. With a CVA, no large cash sums are required to purchase business assets, as a pre-pack administration requires.
There are some fees you will have to pay, for example, for meeting with the creditors. However, the costs incurred in a CVA are usually deducted from the premiums that the creditors would advise you to pay. For this reason, your business will end up with more working capital and operational cash.
iii) CVAs are kept private
With majority of insolvency processes, the public would know about your company's struggling finances and this can affect its recovery efforts. With CVA, the matter is not as public as liquidation. For instance, you do not have to indicate the debt restructuring arrangement in your company's correspondence.
The above are some reasons why it makes sense to restructure your company debt through a Company Voluntary Arrangement (CVA).