As a company manager, your main concern is to ensure that the business turns profitable. 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.
If your company is in distress, you have various options of getting it back on the right financial path. Among the various options you can pursue is a Company Voluntary Arrangement (CVA). Through this arrangement, you organization can be able to pay off its debt over a fixed period of time. Through a CVA, you will also have a chance to overhaul your company’s management as well as operations.
Before opting for a Company Voluntary Arrangement, it is important to seek support from financial business advisor. You can know the impact of the CVA on your business through the help of the financial advisor. 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 management remains in charge
In some cases, the top management may have played a role in the financial mess that your organization is in. Despite this, the management should be allowed to run the company during the CVA process. You will need the directors to ensure the continuity of the business processes as the restructuring is going on. The support of the directors will be important since they know how various processes in the business are done. When the management is retained and a professional financial advisor brought on bought, the chances of the organization overcoming its financial problems increase.
ii) Lower 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. As a result, the business will have a higher amount of working capital and its cash flow will increase.
iii) Keep the matter private
The public nature of insolvency can affect your organization’s efforts for recovery. On the flipside, CVAs do not have to know by the public. For instance, there is no requirement for the disclosure of the debt restructuring efforts in the company’s communications.
The above are three main benefits of a Company Voluntary Arrangement (CVA).