Company Voluntary Arrangements – Could We Make Use Of Them?
By Tim Corfield.
In the present bank lending climate most banks are reluctant to lend to any company with a hint of balance sheet weakness. Could a Company Voluntary Arrangement (CVA) be used as an alternative cost-effective way to restructure a company balance sheet?
The approval of a CVA can achieve immediate business viability, positive cashflow, protection from creditors and a clear future management strategy.
How Does A CVA Work?
CVA’s can be used to help insolvent companies survive by cutting costs and reaching an agreement with their creditors over existing liabilities. A CVA is not an option for a failing business!
A CVA involves a critical examination of:
• historical profits, cash flow and future projections
• incumbent management
• the reasons for the present financial difficulties
• the plan going forward to achieve success
CVA’s Stats
356 CVA’s according to the insolvency statistics Q4 2018. Compared with 2017 increase of 16.0% The total number of company insolvency appointments last year was 17,439 and the number of approved CVA’s represents less than 2.0% of these appointments.
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.
Finding The Best Solution
It’s also true to say that CVA’s are not suitable for all companies. The experience of the Insolvency Practitioner is vital to assess whether the CVA procedure is right for a particular company and then to achieve a successful outcome.
It is now possible to apply for a ‘moratorium’ (whereby no legal action can be taken against a company without permission of the court) until creditors have had an opportunity to assess proposals and vote to accept or reject at a creditors’ meeting. This procedure can make the difference between success or failure of the proposed CVA. This process and trading through the moratorium period would be overseen and supervised by the Insolvency Practitioner.
CVA Process Explanation
Are you interested in finding out more about the Company Voluntary Arrangement process for your clients? Please call 01922 722205 or email Tim Corfield enquiries@griffinandking.co.uk or Mark Shaw for a free appraisal of a situation or confidential chat.
Griffin and King are leading Insolvency Practitioners in Stoke, offering advice and solutions for businesses in financial difficulty. Contact us now – the sooner you do, the sooner we can help you.
