Updated: 6th July 2020
Although businesses across the UK are slowly reopening following lockdown, they are reopening to a whole new world and an unprecedented set of challenges. While trade has been decimated for months, overheads have continued to accrue and many businesses simply don’t have the cash flow to meet current liabilities.
This is the very definition of insolvency; a situation many companies find themselves in through no fault of their own. If your business is struggling following the COVID-19 lockdown which has paralysed the UK economy, it’s crucial that you take early advice.
Depending on the severity of your company’s financial situation, the threat of insolvency can usually be defined as cross-roads where early advice can take you on the path to recovery while failure to face your financial commitments can lead you down the road to ruin.
By proactively seeking advice, there are often more rescue options available to your company – one of which is a fast-track Company Voluntary Arrangement (CVA) which allows you to remain in control of your company’s operations yet ringfenced from creditor pressure. A CVA has to be approved by 75% of your company’s creditors – and usually they are willing to do so as CVAs represent a better chance of recouping their money in comparison to a liquidation procedure where they could end up with nothing.
You deal with the day-to-day running of the business, as usual, but your payment obligations are re-scheduled to level that you can afford.
Bob Maxwell, a Partner at Real Business Rescue and a company restructuring expert, says:
“A fast-track CVA is a formal insolvency process with the flexibility to bend to these unprecedented times. Businesses across the UK are struggling but many of them are viable if given the opportunity to survive – and this is what a fast-track CVA can do.
“Hundreds of thousands of companies are surviving purely on borrowed time through loans, putting off the VAT, delaying landlord payments and so forth. This will all rear its head again in the short to medium term and if businesses wait until that point to take advice, it might be too late.”
Bob, who has a wealth of experience in rescuing UK companies on the verge of financial distress, emphasised how a proactive rather than reactive approach is key in safeguarding the future of previously profitable businesses.
“If a company has a genuine chance of succeeding going forward, a CVA can be a highly effective tool and provide benefits to both debtors and creditors. A fast-track CVA avoids a lot of the expense and disruption of traditional CVAs and can make the difference between success and failure. We can quickly make a judgement on whether the business is eligible following a free consultation with directors. If this is the case, a fast-track CVA will enable the company to continue trading, employing and working with its supply chain, whilst creditors will recoup more through a CVA than they would if the debtor went into liquidation.”
If your business has been severely hampered by COVID-19 and you’re facing creditor pressure, HMRC debts, historical corporation tax, VAT debts, landlord liabilities, and/or any supplier debts, it’s important that you take professional advice as soon as possible. A fast-track CVA can breathe new life into your business and the process can be completed in as little as six weeks.
For a free consultation with Bob or a member of his expert restructuring team, contact Real Business Rescue today. All advice is free and 100% confidential.