Businesses and companies often go out of business. There is no surefire way to make sure a business doesn't fail. Poor management and negative cash flow can cause a business to have trouble making money, but these problems are easy to fix. However, natural disasters and a drop in the market are things that no business owner can do anything about.
When a business owner's finances take a nosedive, they might not realise that there is another way to save their business. The Company Voluntary Arrangement is this choice. A company voluntary arrangement is mostly a contract between a business that is having trouble paying its bills and those who owe money to it. A CVA is a good solution for both the people who own the business and the people who owe money to the business. With a CVA, the business owner will be able to keep his business and creditors will be able to get at least some of the money they are owed. The main goal of a company voluntary arrangement is to get the business back on solid financial ground and get it to start making money again.
For a CVA to be considered, a business needs to be able to get back on its feet financially and start making money again. In a CVA, the owner or manager of the business will still be in charge and run the business. But some changes will be made to how the business is run in order to make it more profitable. Once the business is back on its feet financially, a portion of the profits will be used to pay off any outstanding debts.
A CVA is not an informal deal between a business owner who can't pay his debts and his creditors. If a business owner thinks that his or her business has a chance of staying open, he or she will call a legal CVA professional to start the CVA process. Before a CVA is written, a legal CVA operator or an insolvency practitioner (IP) will visit the business to find out what happened and why it failed. The IP or the CVA operator may suggest changes that can make the business more stable. If the CVA operator or the IP thinks it's necessary, a CVA will be written, sent to the county courts for approval, and then sent to all the creditors. 75 percent of the creditors must vote in favour of a CVA for it to go through. There needs to be a second vote, this time by the owners of the business. The CVA will go forward if shareholders vote 50 percent in favour.
A company voluntary arrangement is a long, tiring process that can wear on most business owners' nerves. On the other hand, a CVA might be the best thing a business owner who is having trouble can do, especially if he is sure that his business still has the ability and potential to get back on its feet financially. CVA is also a way to give the business a fresh start and the owners a second chance to succeed.
