CVAs – an underutilised resource?
12 June 2017: A Company Voluntary Arrangement (CVA) can be an effective tool to allow the directors an opportunity to address the company’s debt problems and to reorganise the business.
CVAs are designed as a mechanism for business rescue and will result in a greater return to creditors in comparison to other insolvency procedures. However, statistics suggest that the CVA process is not commonly used. During the first 3 months of the year, 2,693 companies went into liquidation in comparison to the successful approval of 81 CVAs.
One of the most common reasons for not recommending a CVA process is due to there being no underlying viable business to rescue. In addition, being constrained by the terms of a CVA for up to 5 years can be an unattractive prospect for directors.
The Milton Keynes team recently successfully implemented and completed a CVA within a period of 7 months. The directors retained the control of the business and the return to creditors was six times greater than any other insolvency options. The company is now out of the CVA and is looking ahead to a profitable future.
There is a perception that CVAs have to last for several years and they commonly fail – this is not our view at BRI. If you would like to discuss CVAs or any other issues which might be affecting you or one of your clients, please contact one of our experienced management team.