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Company Voluntary Arrangements and Business Turnaround

Date Added: 23/02/2016  

At 4R Business Recovery, we specialise in helping business owners turn their businesses around when they are experiencing some form of financial difficulty. One of the ways we do this is through a Company Voluntary Arrangement (CVA), which despite recent data showing a drop in numbers, remain an excellent turnaround vehicle when set up with realistic goals.

What Are the Recent Statistics for Company Voluntary Arrangements?

These figures for Q2 2015 from The Insolvency Service show that the total for all types of company insolvencies in England and Wales (Creditors’ Voluntary Liquidations, Compulsory Liquidations, Administrations, Receivership Appointments and Company Voluntary Arrangements) continued on the downward trend that started in Q2 2013, which is broadly consistent with a growing economy.

Within these figures, the number of Creditors’ Voluntary Liquidations was fairly stable, Receivership Appointments increased versus Q1 2015, Compulsory Liquidations were 15.4% lower than in Q1 2015, whilst Administrations were down 1.2% on Q1 2015. Only 91 Company Voluntary Arrangements were arranged in Q2 2015, their lowest level since Q4 2007.

Why Have the Numbers of Company Voluntary Arrangements Fallen?

CVAs can be a good way of turning an otherwise viable business around that is struggling under a burden of debt. As the name suggests, they are a voluntary means of repaying creditors some or all of what they are owed, and once approved by at least 75% of creditors, the arrangement becomes binding on all creditors. The main advantage of a CVA is that it allows the directors to stay in control of the business, freezes debts and legal action and gives up to 5 years to repay creditors.

So is the recent decline in CVAs – steeper than most of the other forms of company insolvency - to do with more than just a growing economy? Have they simply just become less popular as a solution to creditor problems? One concern is that CVAs sometimes fail at the practical rather than technical level. In other words, they sound good but sometimes fail to deliver. Why should this be the case?

A CVA needs to be well planned and realistic. Sadly, many are not, and the outcome can be liquidation, because insufficient attention has been paid to improving a business’s underlying structure to help its performance (e.g. in areas such as sales, marketing and customer confidence) during the breathing space given by the CVA.

4R Business Recovery Specialises in Realistic CVAs

We work closely with our clients to determine what the best option is to turn their business around. If we believe a CVA is the best vehicle, then we work closely with you and one of our trusted Insolvency Practitioners (CVAs have to be supervised by an IP) to set it up.

Importantly, however, with our experience and knowledge of Business Turnarounds, we’ll work with you over the long term to ensure that areas where the company needs to be restructured are identified and the recommended changes implemented, giving the best chance of long term success.

Despite the recent statistics, our experience is that CVAs which are realistic and balanced and supported by appropriate restructuring, can and do work. We have helped hundreds of directors and companies protect themselves from creditor pressure, and it might well be that a CVA is the best solution to your problems.

So If your company is struggling with a burden of debt and you’re not certain what to do, then contact us or call us now on 0800 902 0123 for a FREE initial chat. We offer honest, pragmatic advice on the best options for you and your business.

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