If your limited company is insolvent, it can use a Company Voluntary Arrangement (CVA) to pay creditors over a fixed period.
If creditors agree, your limited company can continue trading. If you’re a sole trader or self-employed, apply for an Individual Voluntary Arrangement (IVA).
A company or limited liability partnership (LLP) can apply if all the directors or members agree. A CVA can only be arranged through a licensed insolvency practitioner.
1. The insolvency practitioner will work out an ‘arrangement’ covering the amount of debt you can pay and a payment schedule. They must do this within a month of being appointed.
2. They’ll write to creditors about the arrangement and invite them to vote on it.
3. A CVA can only be approved by creditors who are owed at least 75% of the total debt.
Once a CVA is approved, your business will continue to trade and you will need to make the scheduled payments to creditors through the insolvency practitioner until these are paid off. It is likely that during this time, the root causes behind the need to enter into a voluntary arrangement will be addressed by the management team and their professional advisers to ensure than once the CVA is successfully completed, your business returns to a position of full health.
If you don’t get the required 75% vote from the creditors, your company could face voluntary liquidation.
If you don’t meet the agreed payment schedule, any of your creditors can apply to wind up your business.