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The coronavirus and some of the measures taken to try and stop it from spreading have had a huge impact on businesses in the UK.
While businesses in a select few industries have seen a boost in sales, most have been affected by a slowdown in demand.
In some sectors, the virus has been cataclysmic, particularly those that can’t operate with socially-distancing restrictions, like hospitality and travel businesses.
Government support including the Coronavirus Job Protection Scheme, self-employment (but not limited company) support, rate holidays, grants and government-backed loans have been widely publicised. But this support has not been enough to protect all businesses.
A survey from the Office for National Statistics found that around 15% of all firms in the UK were at risk of insolvency by April 2021.
With much uncertainty still over key business questions such as what effect vaccination will have on consumer confidence and when the economy will be able to fully re-open, many businesses are having to take tough strategic decisions without perfect information.
Unwilling to take on undue risk, many owners have already closed up shop and decided to cease trading using an insolvency process like a Member’s Voluntary Liquidation (MVL). An MVL is one of the most tax efficient ways of withdrawing cash and assets from a company.
When it comes to an insolvent company, however, pursuing an MVL is not an option. And with most government support schemes reported to finish in April 2021, businesses in a precarious position should explore all options available to them – including a Company Voluntary Arrangement (CVA).
What is a Company Voluntary Arrangement (CVA)?
A CVA is an agreement between a company and its unsecured creditors. The company agrees to pay back liabilities over a specified time period and the creditors agree to hold back on any legal action that could lead to the winding up of the indebted company.
The agreement lasts for a set period, usually five years. After this time, all credit with participating creditors is forgiven, even if you have not paid back the full amount you owe.
Pursuing a CVA has a number of advantages for struggling companies that are looking to bounce back from the coronavirus crisis. Companies pursuing a CVA:
- Can continue trading
- Can continue accessing government support, like the furlough scheme
- Are protected from legal action by unsecured creditors
Want to learn more about a Company Voluntary Arrangement (CVA)? Speak to a member of our business debt advice team today. Call: 0800 611 8888.