Alternatives to a CVA 

There are a number of alternatives to a Company Voluntary Arrangement such as:

Refinance – if the business can raise sufficient finance to deal with its financial problems and restructuring of the business then this may be the best solution.  However the fundamental problems of the business must be addressed otherwise the business will find itself with the same problems once the additional capital has been exhausted.

Equity – it may be possible to raise additional finance through issuing share capital to existing or new shareholders.

Trade sale – a purchaser of the business may be able to provide the cash injection or resources required to ensure the business can continue.  However if the Company is displaying signs of distress then they may be reluctant to purchase or may take the view that if they wait they will be able to pick the business up for little or no cost from an Administrator or liquidator.

Informal agreement – if there are a small number of creditors it may be possible to agree a repayment schedule of the debt.  These are normally not legally binding and as such do not provide the certainty of a CVA.

Soft loans – certain government bodies do provide loans to struggling businesses where alternatives have been exhausted. 

Administration – this effectively gives up control of the business to an Insolvency Practitioner who will normally seek to sell the business.  The cahs realised from the assets of the business are used to pay off the creditors (usually a small proportion of the debt is repaid).

Receivership – the directors can request that finders that hold a charge over the assets of the business appoint receivers – Administrative Receivers, Law of Property Act Receivers or Fixed Charge Receivers.  The role of the Receiver is to maximise the return to the charge holder.

Liquidation – creditors or the shareholders can place the company into liquidation.  The business will normally cease to trade immediately and a liquidator will be appointed to sell off the assets and distribute any proceeds to creditors.