There is no fixed cost for a CVA, as a lot depends on an individual company’s circumstances. We can assess your situation and discuss costs with your director before proceeding. Some licensed insolvency practitioners (IP) may charge an upfront fee for advice relating to a Company Voluntary Arrangement (CVA). At Wilson Field, however, we do not require our clients to make such payment before deciding to implement a CVA. After the company has considered the options and decided on a CVA, the IP is appointed, and the arrangement commences, the following costs will apply.
How are CVA fees charged?
In a CVA, you will make a monthly payment to the IP, which is held in a specially designated account, and later divided amongst your creditors. We take the IP’s fee from this monthly amount, so no upfront fee for the CVA itself is required. We will, however, ask that the company pays the first monthly payments in advance of the creditor’s meeting; this shows the creditors that the company is serious about the CVA proposal.
While dealing with a CVA, an IP has three roles; firstly, as an Advisor to the company, then as Nominee (the IP ‘nominated’ to deal with the CVA) and then, if the CVA is approved, as Supervisor.
Acting as Advisor
The IP, when acting as Advisor, will review the company’s situation and advise on the options available. If the directors are keen to explore the possibility of a CVA, it will be important to produce and review cashflow forecasts that can be substantiated, and demonstrate that there is an underlying solvent business once the current issues have been addressed.
If all parties are happy that this is feasible, then the IP will assist the directors in putting together a CVA proposal.
The proposal includes:
- Cash flow projections.
- Creditor list with up to date balances.
- Asset list and estimated valuations.
Acting as Nominee
The Nominee is the name given to the insolvency practitioner (IP) who has agreed to act, and who the company have nominated to assist them in putting forward a CVA Proposal to its creditors. The full Nominee’s fee is not usually payable until the CVA is accepted at the meeting of creditors. We decide the fee on a case-by-case basis, but it is generally a fixed fee, and creditors will need to agree to the CVA before we can action it.
This cost covers the work carried out by the IP in negotiating the CVA proposal with creditors. It includes the liaison with the likes of HMRC, acting at the creditor’s meeting, and the CVA proposal document preparation. It also covers communication with creditors regarding any requested queries, concerns or modifications.
When voting at the creditor’s meeting, the creditors are entitled to put forward suggested modifications to the proposal. We commonly see modifications from HMRC, which require the company provides sufficient funds for the Supervisor to hold to one side to wind-up the company, in case the CVA fails. The modification also stipulates that these funds are provided to the IP on or before the meeting of creditors. If HMRC is a majority creditor, then this may be a modification that you will have to consider. A creditor’s vote with modifications will have to count as a rejection if the modification is not accepted.
Once appointed, the IP becomes ‘Supervisor’ of the CVA for the duration of the arrangement. The Supervisor’s fee is worked out on a case by case basis, similar to the Nominee’s fee, and again must be agreed by creditors, though it can be a fixed fee based on time incurred or be a percentage of the realisations made on the case. The fee is typically deducted from the monthly payments made into the CVA by the company and does not represent an additional cost.
This fee includes:
- The work in preparing a CVA annual report to creditors, as well as conducting six-monthly reviews.
- Reviewing the Company’s finances on an annual basis to assess whether contributions can be increased.
- The monitoring of the contributions, agreeing of claims and distribution to creditors.
- General monitoring of the CVA’s progress relating to the proposal.
Although a CVA is an extremely versatile option for a lot of companies, it may not be suitable for everyone. A lot will depend on how much debt is owed, or how receptive your creditors would be to the idea of monthly repayments. If they’re not open to the idea, or a CVA isn’t feasible, there are alternative debt-relief options which could be better suited for you.
If a CVA isn’t possible, but you’d still like to keep the company operating, you can explore company administration as an option. An administration involves the restructuring of a company with the intent of rescuing it and allowing trading to continue. Alternatively, if your debt is to HMRC, you can apply for a Time to Pay Arrangement (TTP) to repay your liabilities in monthly instalments.
As much as you might want to keep the company open, the volume of debt or creditor pressure could make this impossible. In these circumstances, you may be better off closing the company down through Creditors Voluntary Liquidation (CVL) before your creditors apply to wind-up your company.
We do not require any upfront fees in respect of the advice given for a CVA. All initial advice we offer is free, no matter how it is delivered. The CVA fees, consisting of the Nominee’s and Supervisors’ Fees, are taken from the pot of funds made available from your monthly payments before a distribution is made to creditors. None of these will be at an additional cost to the company.
How we can help
If you think a CVA might be the right choice for your company, it’s essential to seek advice as soon as possible. If you’re worried about costs, we can provide a breakdown of the various expenses involved in a CVA and offer advice on the different procedures available to your company. Even if you don’t end up applying for a CVA, we can advise you on other insolvency options which may be more suitable. All our initial advice is free of charge with no obligation.