A detailed report into UK Management Attitudes to Company Voluntary Arrangements. By Tim Mocroft (from the DTI).
Tim Mocroft produced this detailed report into the CVA mechanism and the attitudes of Government, the insolvency profession and business managers to restructuring companies. It sheds light on why many people are not aware of the CVA tool and why the insolvency profession is not a great fan of the CVA.
Tim welcomes the opportunity to bank the CVA drum, which is why we have included this report on our site, Tim was asked by the DTI to look at why CVA’s were not used more in UK insolvency scenarios. Then they did not publish the report!
“We can say with some confidence that for the CVA process to become firmly established as a method of company rescue and for its potential to be fully exploited, several conditions need to be met:
Clearly here at KSA CompanyRescue we fully support his findings. We think it’s often a scandalous waste of business, investors and creditors money when UK companies enter terminal insolvency without getting full, frank and appropriate advice beforehand.
Let us know if you have any comments on info@companyrescue.co.uk
The preface of the report is written by the head of the Centre for the Study of Financial Innovation states:
Encouraging enterprise is obviously vital for the UK’s future wealth and prosperity. However, what happens if a company hits problems that are serious but not terminal? And how can it be given the breathing space necessary to come through hard times? There is already on the books a partial answer – the Company Voluntary Arrangements (CVA) regime. But relatively few UK companies currently make use of it – or even know much about it. Tim Mocroft, a businessman with close links with the DTI, has undertaken a number of detailed interviews with companies who have gone down the CVA route to ascertain why. The CVA regime was introduced as long ago as 1986, to give the UK business community – particularly smaller firms - the same sort of institutional rescue mechanism as exists in the US (under Chapter 11 of the bankruptcy code) and in many other countries as well. The possibility of reorganising a company and its debts at the same time as it continues to operate is, clearly, an attractive one, and it is hard to see why so many businessmen are unaware of the CVA route – indeed, are still unaware that there is any realistic alternative to “going bust” if business conditions deteriorate suddenly. That is the problem. The CVA route is there; the consensus is that “it does what it says on the tin”. But awareness is low, and take-up (though it has improved) is disappointing. So, what will make CVA’s work better? To give at least an indicative answer to that question, Tim put together a multidisciplinary team – including an academic psychologist – to carry out a series of structured interviews in a completely independent environment. Because this is not formally a DTI report, rather a report by a team assembled by Tim, it seems more appropriate that it should be published independently – and we are therefore, delighted to bring the work done by Tim Mocroft and his team to a wider audience.
Encouraging enterprise is obviously vital for the UK’s future wealth and prosperity. However, what happens if a company hits problems that are serious but not terminal? And how can it be given the breathing space necessary to come through hard times?
There is already on the books a partial answer – the Company Voluntary Arrangements (CVA) regime. But relatively few UK companies currently make use of it – or even know much about it. Tim Mocroft, a businessman with close links with the DTI, has undertaken a number of detailed interviews with companies who have gone down the CVA route to ascertain why.
The CVA regime was introduced as long ago as 1986, to give the UK business community – particularly smaller firms - the same sort of institutional rescue mechanism as exists in the US (under Chapter 11 of the bankruptcy code) and in many other countries as well. The possibility of reorganising a company and its debts at the same time as it continues to operate is, clearly, an attractive one, and it is hard to see why so many businessmen are unaware of the CVA route – indeed, are still unaware that there is any realistic alternative to “going bust” if business conditions deteriorate suddenly.
That is the problem. The CVA route is there; the consensus is that “it does what it says on the tin”. But awareness is low, and take-up (though it has improved) is disappointing.
So, what will make CVA’s work better? To give at least an indicative answer to that question, Tim put together a multidisciplinary team – including an academic psychologist – to carry out a series of structured interviews in a completely independent environment.
Because this is not formally a DTI report, rather a report by a team assembled by Tim, it seems more appropriate that it should be published independently – and we are therefore, delighted to bring the work done by Tim Mocroft and his team to a wider audience.
Andrew Hilton Director, CSFI
To download the report please click here. (Please note the copyrights on this report).