A CVA is a rescue alternative to other insolvency procedures, where the primary aim is usually to avoid a cessation of trading and subsequently maximise a return to creditors via future trading profit.
A business in financial difficulty is not necessarily in long term decline. Cash flow issues, bad debts and other trading problems can accumulate leaving a business vulnerable, even if the order book is healthy.
A CVA requires the full agreement of all offices of the company and will be overseen by a licensed insolvency practitioner.
It can assist when a business is suffering financial difficulty and requires time to implement steps resulting in a positive and sustainable improvement.
Times when a CVA is appropriate
- The company must be insolvent or considered to be insolvent after all contingent liabilities are taken into account
- Have a realistic prospect of recovery supported by the views of the insolvency practitioner
- Be able to identify the reasons for the insolvency and indicate via trading projections and cash flow forecasts, that the proposals to creditors are viable