Understanding the Impact of Company Voluntary Arrangements (CVAs) on Personal Credit in the UK
For business owners and company directors in the UK, navigating financial arrangements can often be complex—particularly when it comes to creditworthiness and personal guarantees. Recently, a common query has arisen among entrepreneurs: If a business has entered into a Company Voluntary Arrangement (CVA), does this affect the personal credit profile of the individual behind the company?
This article aims to clarify the implications of CVAs on personal credit records and provide guidance for business owners considering personal guarantees in their financial dealings.
What is a Company Voluntary Arrangement (CVA)?
A Company Voluntary Arrangement (CVA) is a legal agreement between a company and its creditors, allowing the company to repay its debts over a structured period while avoiding insolvency procedures such as liquidation. CVAs are often used by distressed businesses seeking to recover and continue operations with creditor approval.
CVAs and Personal Credit Files: What’s the Connection?
An essential consideration for company directors and individuals associated with businesses is whether a CVA impacts their personal credit history.
Key Point:
In the UK, a CVA is a company-level arrangement. It appears on the company’s credit report but does not automatically appear on an individual’s personal credit report unless personal guarantees are involved or because of other personal financial activity.
The Role of Personal Guarantees
One significant factor that can link a CVA to an individual’s credit profile is the presence of a personal guarantee. For example, if a director (or related person) provides a personal guarantee to secure business debts, defaulting on those obligations could lead to adverse entries on their personal credit record.
In your scenario:
Your sister, who has offered to act as a guarantor for your rental lease, has been involved as a director of a company with a CVA. If she has provided a personal guarantee for a business debt, and that guarantee results in a default, this could negatively impact her personal credit history.
Implications for Personal Guarantees in Rental Agreements
When applying for a rental property, landlords often conduct credit checks to assess the applicant’s creditworthiness. If your potential guarantor has a history linked to a CVA—especially if tied to a personal guarantee or other credit activity—this might influence their referencing process.
Potential outcomes include:
– A more cautious landlord may view the guarantor’s credit history less favorably.
– The landlord’s referencing agency
