How are employees affected by a CVA?
COMPANY DEBT ANALYSER
A Company Voluntary Arrangement (CVA) is an agreement between the company and its creditors, which allows the company to repay its debts over an agreed period of time, without fear of legal action being taken by the creditors.
What happens to Employees in a CVA?
The purpose of a CVA is to allow the company to remain in control of the business and continue to trade without struggling with the pressures of historical debt. Usually entering a CVA means that the organisation can go on running as before, with a legally binding debt repayment agreement in place. This means that employee’s contracts remain the same and employees can continue to work in the organisation as before. A CVA does not mean that employees are automatically made redundant.
However part of the CVA process may results in the business needing to be restructured and major changes in how the business operates may need to be made. If this is the case then employee’s positions may be at risk. The business may decide that this is necessary in order for it to complete in the market, or that the way the business was running previously is no longer viable and is effecting the long term profitability of the company.
If this is the case and employees will lose their jobs because of the restructure the company must follow the standard redundancy procedure to ensure that employees are treated lawfully and fairly.
How to ensure a CVA is successful
In order to make a CVA successful you will need the following:
A viable business that is capable of making a profit in the short or the long term
A reasonable and achievable structured repayment plan
Appropriate levels of working capital
A willingness to make changes to the way the company is run
The willingness to work hard to turn around the business
An experienced CVA practitioner to lead the process
Getting help from the professionals
If your business is insolvent, but you believe it is still viable then you should speak to a CVA expert as soon as possible so that you can take the appropriate action.