(PRWEB UK) 31 July 2013 -- A company voluntary arrangement (CVA) is still a valuable tool in rescuing a company when it becomes insolvent. If the business becomes insolvent there are really only three options available: the business goes into administration, liquidation or into a company voluntary arrangement.
The first two generally result in the company closing down, or being sold off with the assets being distributed by the insolvency practitioner. If no buyer can be found, then the business can sold back to the management. However, the banks are very reluctant to approve any sale back to the incumbent management, and in addition to the public outcry over such practices, these “pre-packs” are less common nowadays.
In October 2012, KSA Group did an analysis of all the companies that the company successfully negotiated CVAs for and that have been approved by creditors and filed at Companies House since January 2011. The research showed that 1760 jobs were saved in that time. As of July 2013, KSA have now saved 2300 jobs! One of these companies accounted for approximately 200 of these.
What does it mean by saving jobs?
Well, prior to the CVA being filed these businesses faced being wound up or being put into administration or liquidation as they suffered under the weight of their debts. The CVA allowed the unsecured creditors to receive a dividend on their debts ranging from 30p to 100p in the £1 and the business to get on with making money and being a useful and productive member of the business community.
It should be noted that company voluntary arrangements are often difficult to agree. It pays to have an adviser that has done a number of CVAs before, as experience counts when creditors and management need to be engaged throughout. One important factor in a CVA favour is that they are looked upon favourably by HMRC. In fact, a CVA proposal can halt the threat of a winding up petition from the HMRC, provided it is realistic and the HMRC can be convinced that it will work.
When examining options for a business in difficulty don’t dismiss the CVA it could allow the company to continue to trade with the directors in control, not an insolvency practitioner. However, one word of caution: once in a CVA the business will need to have exemplary financial reporting and a strict regime which is still overseen by an insolvency practitioner in their capacity as the supervisor.
Robert Moore, 447584583884, [email protected]
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