The advantages and disadvantages of a CVA

Once a CVA is agreed payments to the company creditors will be reduced to an affordable amount. At the end of the agreement any unpaid debt is written off.
No upfront investment is required to implement a CVA. Fees charged by the insolvency practitioner are taken from the monthly payments made by the company. Directors do not have to raise any additional funds to pay fees.
A CVA is a private agreement. Suppliers and customers do not have to be told of the company’s situation.
Because the company remains trading, there is no need for the involvement of a liquidator. As such, there is no investigation into the conduct of the directors which could lead to accusations of wrongful trading.
Creditors will get greater returns than if the company was simply liquidated or a pre pack administration was undertaken.

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Creditors will have to agree to receive less than they are owed. However, returns will be more than if the company was liquidated.
The CVA will be recorded against the company’s credit file. This may make it more difficult for the company to borrow and may affect the buying decisions of new clients if they are worried about the financial stability of the business.
Once a CVA is agreed, it must be maintained. If the company fails to make its agreed payments, then the insolvency practitioner may be forced to wind it up.

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