Example Of A CVA

If your business is experiencing debt problems, it can be hard to know which debt recovery method will suit you best. Many people choose to apply for a Company Voluntary Agreement, and to show how they could help you I have outlined a case study below.

The company in this example was a 46 year old machinery sub contractors, which had experienced a management buy-out and were in the early stages of a volume manufacturing contract with a large automotive client.

As the contract looked to be very profitable, new expensive machinery was needed, which obviously meant a dip in cash, but with the outlook that the contract would more than pay for itself. However the levels of turnover initially projected were not reached and on top of this there were some issues with the machinery meaning parts of the engineering had to be sub contracted to an external company.

These unpredicted problems left the company with severe cash flow problems, which built up to high debts owed to several secured and unsecured debtors, which the company could not pay.

Then in the latter portion of 2000 a Company Voluntary Agreement was approved for the company by the creditors. As part of the agreement the preferential was paid in full and the unsecured creditors were to receive dividends of fifty pence in the pound. The initial contract with the automotive business was given over to another company and the 46 year old business continued to trade as sub contract engineers for a number of blue chip clients.

The CVA was called to an early conclusion after less than five years and jobs were saved, investments safe and the company continued to thrive.

Learn more about company voluntary agreements, by contacting visit The Business Debt Advisor for business debt help.

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