CVA Example One :
An engineering company lost a
big contract and, as a result, struggled to
pay its debts as they fell due.
When they contacted us, the company
had debts of over £150,000.
The company had streamlined its
operations and had become more profitable meaning
that it was able to pay ongoing liabilities
as they fell due but was under pressure from
creditors to pay the historic debts.
We worked with the company to
produce proposals that were both realistic for
the company and fair to creditors.
As a result of creditors accepting
the proposed CVA, the company now pays £780
per month plus 15% of future net profits (after
tax) for 60 months.
It is anticipated that approximately
£85, 000 will be paid into the CVA in
total. The balance of the debts (some £65,000)
will be legally written off under the terms
of the CVA as agreed by creditors.
NB. In the above example, the
Landlord agreed to participate in the CVA for
the arrears of rent and is now accepting ongoing
rent on a monthly (rather than quarterly) basis.
CVA Example Two :
After suffering a bad debt, a
printing company was facing liquidation with
debts of £83,000.
Suppliers were refusing to supply
the company with materials needed to continue
production until outstanding invoices were paid
in full.
Under the terms of a CVA, the
requisite majority of creditors accepted its
offer of a lump sum of £40,000 which was
raised by a combination of the sale of some
machinery that wasn’t required and an injection
of funds by shareholders.
Creditors agreed to the offer
because, as well as fees being higher in a liquidation
than a CVA, the funds made available by the
shareholders for the CVA would not have been
available in a liquidation which would have
meant that creditors would have received a much
smaller dividend payment if the company had
gone into liquidation.
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