Alternatives to Liquidation
Company Debt Help - Alternatives To Liquidation
There are a few options when considering alternatives to Liquidation and they are included below:
Company Voluntary Arrangements? (CVA)
A Company Voluntary Arrangement is a legally binding agreement between a company and its Creditors. The arrangement is over a maximum of 5 years and is a safe way to make repayments to your Creditors within this period without fear of the Creditors changing their mind mid-term due to the legal protection it provides.
The Company Voluntary Arrangement is becoming more widely known and the Government is encouraging its growth because it wants to keep people employed and companies trading when they require company debt help. The Company Voluntary Arrangement is not always ideal for every company, however, if your company is viable but needs to control its debts then the Company Voluntary Arrangement may well be for you. If your company is overwhelmed by debt then this is the way to reach a legally binding agreement with your Creditors about payment of all, or part of its debts over an agreed period (max 5 years). A Company Voluntary Arrangement can be proposed by:
- The Administrator, where the company is in Administration, or
- The Liquidator, when the company is being 'Wound Up', or
- The Directors, in other circumstances.
A Company Voluntary Arrangement cannot be proposed by Creditors or shareholders. Before the proposal is made, the Liquidator or Directors can apply to court for a Moratorium that prevents Creditors taking action against the company or its property for up to 28 days. If an Administrator is in office, the company will already be covered by the Moratorium arising from the Administration.
When the Company Voluntary Arrangement has been proposed, a nominee (who must be an Insolvency Practitioner) reports to court on whether a meeting of Creditors and shareholders should be held to consider the proposal. The meeting decides whether to approve the voluntary arrangement. If 75% in value of the Creditors, present in person or by proxy, agree to the proposal, it is then legally binding on all Creditors who were entitled to vote at the meeting or who would have been entitled to vote if they had been notified.
Most of our clients admit that they are losing sleep over their business concerns, if you are feeling stressed at the moment and you are seeking company debt help then please take the time to contact us. We will be more than happy to talk you through your options and provide you with some suggestions on which direction to take.
Mike Smith - 079 1234 4394
Tony Smith - 0791 2211 777
Office - 01903 891 586
Trading through with a Company Voluntary Arrangement?
The whole point of a Company Voluntary Arrangement is to save your business and keep your employees employed. By ring-fencing your company debt it will not only take the Creditor hassle away from you, but will also allow you to focus on doing what you do best. In most cases as long as the Directors can prove the Company Voluntary Arrangement is better than Liquidation then Creditors will settle for as much as 70% less.
CVA Payments
Once the whole company debt situation is understood the payments within the CVA will always come down to what the company can afford. We identify what the company can afford by giving your business a health check and pulling together a cash-flow forecast with you. Having obtained an overall sum for ALL company debts including HMRC, we can then divide that by the affordability; interest is frozen and no more can be added so a typical situation is as follows:
Typical Company CVA situation
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Company A:
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You cannot provide a 'CVA' as a Director to your Creditors, only an authorised Insolvency Practitioner can do this. Typically within the 'CVA' Proposal we need to demonstrate that the company's past mistakes have been taken on board and changes have been made, going forward. These changes are required to convince Creditors you are serious but we will advise and support you on this when appropriate.
Once we can get approval from 75% of the Creditors who attend the Creditors meeting the proposal is accepted. Once accepted - the Directors may carry on trading as normal providing the Proposal 'changes' are being carried out. Many of our clients keep our services on for a minimum period of 3 months until we are both sure everything is running smoothly.
The nominee (usually an Insolvency Practitioner that we have introduced you to) becomes the supervisor of your arrangement. We will even try to match your personality to the correct Insolvency Practitioner to ensure a good working relationship and confidence in one-another. Once the 'CVA' term has been completed the company's liability to its Creditors is cleared. The company can continue trading during the term (Max. 5 years) of the 'CVA' and afterwards.
Informal Arrangements With Creditors
This is when an agreement is reached between you and your Creditors on repayments of the company debt over a period of time. The important things to remember when considering an Informal Arrangement (Non-Statutory Arrangement) are:
- It is not legally binding and your Creditors can change their mind at any point without notice (e.g. If one of your Creditors becomes Insolvent at any point and needs to call in the liability).
- The repayments, unlike a Company Voluntary Arrangement, will usually be 100% of the liability owed and continued until the total debt is repaid which can be many years. (A CVA is over a maximum of 5 years).
This option can serve its purpose if the relationships between the company and its Creditors are good. The Company must not miss a single payment and the arrangement, ideally, should not be held over a long period of time for the reason explained in point '1.'. Keep this in mind when taking company debt help from firms.
Most debt consultancies offering company debt help often use Informal Arrangements as their main tool/solution as it is easier for them to set up with your Creditors, plus - from their point of view they only have to focus on the short term. Unfortunately, for many businesses this can often be the wrong solution. They may require something more secure over a longer term depending on cashflow such as a Company Voluntary Arrangement. Please take the time to research your options fully before you commit to any Informal Arrangements when taking company debt help.
NB: If a payment is missed within the Informal arrangement it can cause serious damage to your reputation if you then have to return to propose a legally binding agreement such as a Company Voluntary Arrangement, especially when HMRC (PAYE/VAT) are involved.
Administration
This is a court procedure that gives the company some breathing space from any action by Creditors. A court can grant an Administration Order to enable the company to:
- Survive, in whole or in part, as an ongoing business;
- Organise a voluntary arrangement or compromise with its Creditors;
- Get a better realisation of assets than would be possible if the company went into Liquidation.
Get in Touch Now - Don't put it off any longer!
If your business is giving you headaches and you require some company debt help, then don't delay - call us now on 08453 479 822 or 01903 891 586. The sooner you get in touch, the more options will be open to you.
It costs you nothing to find out your options as we offer a free first meeting and we promise that by the end of that meeting you will have your options available to you.
Alternatively, you can email either Mike or Tony at: mikes@imm.me.uk or tony@imm.me.ukand we will get back to you straight away to give you your options.
If you would prefer to speak with Mike (our senior consultant) directly please call him on his mobile - 079 1234 4394.
We always go the extra mile for each individual client and we do not treat you like 'just another number' so call us today and see how we can help you.