What’s the aim of the Covid CVA proposals?
It is anticipated that many SME’s will struggle with enforced closures or restricted trading as a result of Covid. Normally CVA proposals provide for a company to retain its assets and instead offer creditors a monthly contributions for a period of up to 5 years with the balance of debt being written off.
Introductory period and Breathing Space
The Covid proposals provide for an introductory period and a breathing space period during which no contributions are payable. This assumes that during this period coincides with a period during which the company is unable to trade or is struggling with restricted trade.
Simply drafted
The proposals are drafted simply and are intended to save time and costs so that smaller companies can have a lower fee access to CVA’s.
Payment in full
The Standard Form provides for a breathing space period followed by a delayed payment of 100% of the company’s debts. As mentioned above, the proposals are aimed at companies whose businesses have been hit by the Covid-19 pandemic and which need some time to get their businesses fully operational.
Protection from Pre-CVA creditors
Creditors with pre-CVA debts are prevented from enforcing debts against the company while the CVA is in operation.
Trading Costs and contributions
Trading costs incurred during the CVA are to be paid out of new trading income. Once the company has emerged from the introductory and breathing space period and is returning to improved trading conditions, it is envisaged that regular contributions will be made to the supervisor out of operational cash flow.
Payment breaks
The Supervisor has the discretion to grant payment breaks and allow the CVA to be extended by a maximum of 6 months to catch up on the missed contributions. Any more than this and it is envisaged that creditors’ permission will be required.
Getting help and advice on options
The Covid CVA template will not be appropriate for companies that can only repay a proportion of their debt. However, parts of the Covid proposal can be incorporated into a normal CVA proposal including Breathing Space. The CVA rescue procedure is flexible and can be tailored to the company’s circumstances.
The Debt Advisor and The Business Debt Advisor have been in existence for 21 years and we have gained a reputation as the “go to” practice for debt advice and debt solutions for both companies and individuals. The company is authorized and regulated by The Financial Conduct Authority “FCA”and Beverley Budsworth, MD is a licensed Insolvency Practitioner regulated by The Insolvency Practitioners Association.
Get Debt Advice Today
If you would like to speak to one of our team on either business or personal debt, call us on 0800 085 1825 or arrange a callback.
All debt solutions need to be carefully considered and you must take independent debt advice. There are sources of free debt advice and services. You can find out more by contacting the Money Advice Service on 0800 138 7777 or by visiting their website.
