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Corporate Voluntary Arrangements - Getting Your Company Back On Track

Just because a business is having financial problems doesn’t mean that it isn’t a good business at heart. Most businesses based on a solid product or service can be turned around.

Of all the different ways of doing so, Corporate Voluntary Arrangement is one of the most effective options, and it’s specifically designed to preserve the company and rebuild sales and profits while ensuring the creditors are kept happy so they do not take legal proceedings or call in any personal guarantees. Unsecured, trade and tax creditors get their money back through one of two methods; either they are repaid from future company profits or assets are sold and creditors are paid back from the proceeds.

Corporate Voluntary Arrangements have become increasingly popular in recent years for a number of reasons. Lenders want to be seen to be supporting businesses during the recession, especially as they have attracted criticisms for limiting the amount of credit available to companies in the early days of the downturn. This in turn led to an increase in business failure, as not only were companies unable to borrow the money necessary to restructure but those wishing to purchase a distressed business were unable to do so due to less acquisition finance being available. In addition, landlords are now much more willing to revise rental terms to help their tenants stay in business and avoid void periods. 

So what should you bear in mind to ensure a Corporate Voluntary Arrangement will be successful?

The business should have been profitable in the past
The idea is that a Corporate Voluntary Arrangement returns a business to profitability, which is difficult to get creditors to agree to if it never has been.

Well thought out and structured Corporate Voluntary Arrangement deal
Being too optimistic and paying too much back too soon can cause problems in the future. Better ‘slow and steady wins the race’, even if that race does take four or five years to complete.

Agreement of by creditors
A Corporate Voluntary Arrangement must be agreed by unsecured creditors who make up 75% of the total value of what is owed. This is on the proviso that less than 50% of unconnected unsecured creditors disagree and you have the support of at least 50% of the company’s shareholders.

Availability of working capital when needed
There may be points in the Corporate Voluntary Arrangement when a cash injection is needed to facilitate progress so you should have plans in place to access cash for this when needed. Without sufficient cash to meet the company’s liabilities the Arrangement will fail.

Management are on board and willing to work hard
If management cannot accept there has to be serious changes, either in the management structure or in the company itself, and do whatever has to be done to bring about needed change the Corporate Voluntary Arrangement will fail.

Always get advice from expert Corporate Voluntary Arrangement advisors
You need the support of experts who have ‘been there and done that’ successfully for others to build the right deal for you.

Sensible forecasting
It’s very unlikely that a Corporate Voluntary Arrangement will be easy to carry out and quick to complete. The best CVAs take time and effort so look for an expert who understands how to forecast cautiously. 

Corporate Voluntary Arrangements are becoming increasingly popular with both creditors and businesses because they allow a company to manage itself out of trouble with the help and guidance of turnaround experts and put the creditors first at all times so they receive a good chunk of their money back. Many other options result in control being taken away from directors with no facility for input or feedback, large fees being incurred to pay Insolvency Practitioners and creditors losing most if not all of their money.

Write Off Unaffordable Debts

Entering into Scottish Trust Deed will allow you to write off unaffordable unsecured debts leaving you a clean slate and a brighter future to look forward to. There are some debts that cannot be written off. Click here* for more information on the limitations.

Relief From Debt Pressure

Unlike an IVA which can lasts for a minimum of 60 months, the minimum time to complete a Scottish Trust Deed is 48 months (4 years) meaning you will be free from the pressures of debt quicker. Click here for more info on IVA's

Legislated Debt Solution

Trust Deeds are a legislated debt solution, which unlike debt management, means as long as you keep up the arranged repayment plan, you can return to a more stable financial position in life and start to plan for a brighter future.

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