Published: 21st December 2018
In a challenging and uncertain political landscape, together with changing consumer preferences and a squeeze on discretionary spending, even well-established companies are having their resilience tested.
For distressed businesses with a viable future, a Company Voluntary Arrangement (CVA) gives both the time and the opportunity to trade its way out of insolvency by paying current liabilities out of future profits, while allowing current concerns to be addressed and a robust plan to secure its future implemented.
The ultimate aim of a CVA is to effect a transformation while causing the minimum amount of disruption and loss to shareholders, creditors, and employees as possible, as well as being an opportunity for company-wide operational restructuring to take place. Court involvement is minor, all legal action will be halted through a temporary moratorium while the CVA is being prepared, and directors retain control of the business throughout the process.
Unprofitable assets will be divested enabling both funds and resources to be channelled towards more lucrative areas of the company, while non-core elements of the business will be exited to improve liquidity.
CVAs are particularly suitable for those companies whose growth has been accelerated to a level which is no longer sustainable in the current climate. For companies with a significant bricks and mortar presence this typically involves reducing their property portfolio, closing down loss-making establishments while allowing business to continue as normal at more profitable locations often on renegotiated lease agreements.
Caution must be exercised not to pare back the business back too much as to impinge on or limit future success, yet the renegotiated terms must go far enough to realise a substantial turnaround in the company’s immediate fortunes.
Leveraging our considerable experience and expertise we will draw up a carefully considered proposal to present before the company’s creditors, demonstrating that they will see a greater return should the CVA be implemented as opposed to if the company proceeded with any other formal insolvency procedure. We will then implement a strategy to allow the business to emerge from the process with a promising future.
Once appointed we will act swiftly to preserve as much company value as possible while minimising the loss of employment to staff. Securing shareholder and stakeholder support throughout the implementation stage is vital and we will aid this by ensuring all are aware of the rationale behind the CVA, are provided with regular updates and that information channels are left open throughout.