www.company-debt.co.uk

[DavidP]

I am considering a CVA as one of the options for dealing with my company's debts which are dragging it down. How can I calculate what I will need to pay into the agreement to make it acceptable to the creditors?

[Graham Wilson]

Hello DavidP and welcome

There is no hard and fast rule to calculating what must be paid into a CVA. The bottom line is that the company will have to pay as much as it can afford. This would be based on disposable income after all overheads and other costs are paid.

[Steven Jackson]

Hi DavidP

Creditors will often agree to a Company Voluntary Arrangement even if the proposed returns are relatively small. These could be less than 20% of the debts owed. Credtors will agree to this as it is still better than the alternative of closing the company and possibly receiving nothing.

However, having said that, to make a CVA work the business probably needs to be able to pay at least £400-£500 a month.

[Derek Cooper]

Hello DavidP

Have you discussed your options with a company debt expert? They will be able to review the circumstances with you and help you calculate what the business can afford to offer its creditors in a CVA.

The company will always have to pay as much as possible and this will generally have to be more than the sale value of any assets which would otherwise be realised if the company was liquidated. Normally monthly payments will continue for 5 years although this could be less in certain circumstances.

[Graham Wilson]

Hi DavidP

I just thought it would be worth adding that you should not allow your business to enter into a CVA if you think it might struggle to maintain the payment plan. If the agreed payments are not made, it is likely that the CVA will fail and the company will be wound up. This could then put you as a director at risk of wrongful trading.

[Derek Cooper]

Hello DavidP

Graham makes a very good point here. A CVA will fail and the company may be wound up if the payments are not met. If you are thinking of putting your company into a CVA, you must make sure that you are comfortable with the payment structure put forward.

At the end of the day forecasts on spreadsheets can show that a business is in a position to pay the required amounts. However, if you are not convinced in yourself, then you need to re-think the proposal or even consider a differnet option.