Advantages of a Company Voluntary Arrangement

• Normally 50% or more of the company's debt is written off after a CVA is completed leaving the business debt free.

• The company directors are not required to raise a significant lump sum to purchase business assets (as is the case with pre-pack liquidation). The cost of the CVA is covered within the monthly payments made by the company and managed by the insolvency practitioner.

• Creditors are likely to receive a greater return than if the company was put into administration or liquidation. This is because the the company continues to operate and creditors are repaid through the ongoing generation of company profits.

• The CVA is a private agreement between the company and its creditors. The agreement is publicised in the London gazette but does not have to be advertised on all of the company’s correspondence in the same way as an administration 

• The fabric of the company is generally maintained. As such, continuity of supply to customers and employment of employees is maintained (although a certain amount of restructuring may be required).

• Once the CVA is accepted, any current court action against the company is stopped and creditors are not allowed to take any further action.

• The current Directors normally remain in control of the business (although the creditors may insist on changes to the company management).

• As the company is not being liquidated, there is no review of the conduct of the company’s directors and no risk that a director may be barred from their appointment or accused of wrongful trading. 

Disadvantages of a Company Voluntary Arrangement

• There is no requirement for the directors or other management of the company to be changed although creditors may insist on this). As such, possible bad management practices which might have been the reason behind the company’s past failures will remain unchecked.  

• The company’s credit rating is adversely effected. This will mean that it becomes more difficult for the company to borrow and raise working capital.

• It may be difficult for the company to begin new contracts with new clients if they base their buying criteria on the financial stability of the business.

• Jobs within the company may be put at risk if it is decided that a restructuring of the business is required.