There are various costs associated with a CVA. A Statement of Affairs fee will normally be charged up front. There are then additional fees once the Arrangement is in place.
- Up Front Statement of Affairs Fee
- The Nominee and Supervisory Fees
- How does the company pay these charges?
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CVA Statement of Affairs Fee
Before a CVA (Company Voluntary Arrangement) can be proposed a Statement of Affairs has to be produced. This must include an analysis of the company’s current financial position and debt profile. In addition trading projections for the next 12 -18 months are required.
A fee to produce this document will normally be charged up front. The amount charged will depend on the amount of work involved. However it will normally range between £2000-£5000.
Funds may not be readily available to pay this fee. Where this is the case one way of getting them together is to suspend further payments to unsecured creditors.
The CVA Statement of Affairs fee will normally be significantly less than the amount required to fund an alternative company rescue solution such as a pre pack.
The CVA Nominee Fee
The Nominee fee is made by the Insolvency Practitioner (IP). It is for drafting the CVA proposal and negotiating its agreement with the company’s creditors.
The size of this fee will vary depending on the nature of the Arrangement. The amount is made clear to all parties in the proposal documents.
It is not normally charged until the CVA is agreed. At that point the IP then draws the fee from the payments that the company makes into the Arrangement.
Neither the company or directors are expected to provide extra cash to pay the Nominee fee. It is taken from the agreed payments that the company makes.
CVA Supervisory Fees
Supervisor fees are charged by the IP every year that the CVA is in place. These charges are to pay for the work that the IP has to undertake to manage the Arrangement. The level of these fees will vary. How they are calculated will be made clear in the CVA proposal documents.
The ongoing work that the supervisor has to undertake normally includes the following:
- Collecting the agreed CVA payments and making sure they are paid on time
- Making distributions to creditors as per the terms of the Arrangement
- Monitoring the progress of the CVA in accordance with the proposal
- Carrying out an annual review of the company’s circumstances
- Working with directors to manage any changes in company circumstances
As with the Nominee fee Supervisor fees are not paid directly by the company. The IP draws them from the agreed payments that the company makes into the Arrangement.
