COMPANY VOLUNTARY ARRANGEMENTS – ARE THEY UNDERUSED?
At best growth is presently extremely sluggish and we need to get used to the idea that this recovery is going to be a long haul. Given the on going problem that banks are not lending to any company with a hint of balance sheet weakness it is worthwhile to revisit whether a Company Voluntary Arrangement (CVA) may be another way to restructure a company balance sheet.
The successful approval of a CVA can achieve immediate business viability, positive cashflow, protection from creditors and a clear future management strategy.
CVA’s are being used to help insolvent companies survive by cutting costs and then reaching agreement with creditors over existing liabilities. However, this restructuring process is not a “do it yourself” option for failing business. It needs to be implemented with the help of experienced practitioners. The principals behind a CVA may look simple, but in practice they are far more complicated and it is vital that pitfalls are avoided to ensure the long term success of the company.
Inevitably, a CVA involves a detailed examination of the historical profits, cash flow and future projections. It also involves a critical examination of the incumbent management and, above all, a realistic plan to achieve success.
Delicate negotiations often need to be conducted with major suppliers, major customers, company bankers and the Crown authorities which can often result in the success or failure of the plan.
It is also true to say that CVA’s are not really suitable for all companies. Appropriate experience of the Insolvency Practitioner is therefore vital to bring about success for the company through and following the CVA procedure.
Moves are on going through the lobbying of the Association of Business Recovery Professionals for key amendments to insolvency legislation to be made, making it easier for viable businesses to survive, particularly within an insolvency process.
Should you be interested in exploring, in further detail how a CVA may benefit your company please call Tim for a free consultation.