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3 Reasons Why You Should Consider a Company Voluntary Arrangement

 

When you open a company, you definitely want to get the best returns from it. However, you are likely to experience various challenges that can have a negative impact on your revenues. You may find your business in large debts due to both internal and external factors.

 

You can get your business back on the revenue path by considering various options. Among the various options you can pursue is a Company Voluntary Arrangement (CVA). Through a CVA, your company may agree with its creditors on how the huge outstanding debts can be paid and the payment period. 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 a CVA. The advisor will help you understand how a CVA is implemented and its impact on the business. Knowing the advantages and disadvantages of a cva is also important before implementation.

 

Three of the main advantages of CVA include:

 

i)The directors remain in the company

Sometimes, the company's management style may have contributed to the financial woes. Despite this, the management should be allowed to run the company during the CVA process. The management will be critical in ensuring that the company's operations do not come to a standstill when the CVA is being implemented. 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.

 

  1. ii) Lower restructuring costs

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. A CVA does not require a cash lump sum to buy business assets, like is the case with a pre-pack administration.

 

You will have to pay an upfront fee to set up a creditors' meeting. The advantage of a CVA is that the costs you will incur in meeting the creditors will be deducted from the monthly premiums you would have to pay back your debt. This means your business will have more cash flow and working capital.

 

iii) Keep the matter private

With majority of insolvency processes, the public would know about your company's struggling finances and this can affect its recovery efforts. On the flipside, CVAs do not have to know by the public. 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).