How will HM Revenue and Customs vote on Company Voluntary Arrangements?
8 December 2017: BRI Business Recovery and Insolvency assist and advise company directors in preparing a proposal for Company Voluntary Arrangements (“CVA”). A CVA is a formal insolvency process where the CVA allows a company that is insolvent to reach a voluntary agreement with its creditors regarding repayment of all, or part of its debts and to continue trading. If 75% (by debt value) of creditors who vote agree on the proposal then the CVA is accepted
In most CVAs, HMRC are a creditor and have a deciding vote as to whether the proposal for a CVA is approved. Indeed, HMRC have a designated department that solely consider proposals for a CVA and will always cast their vote. One of the most common questions raised by directors when considering a CVA is “how will HMRC vote?”
In our experience, HMRC will generally look to support a CVA proposal where:
- The financial disclosure is honest
- The offer is the best that is available
- Provision is made for payment of all future debts on time.
- All creditors within the same class are treated equally (unsecured/non preferential creditors)
- There are no exceptional reasons for rejection
- All previous overdue tax returns have been submitted
Should you or your clients be experiencing financial difficulty and require advice in respect of a CVA or any other insolvency procedure, please contact any of BRI’s management team who will be more than happy to help.