Written ByKeith Steven
Managing Director
Keith is the author of the content on this comprehensive rescue, turnaround and insolvency website. He is the managing director of KSA Group Ltd - a specialist firm of turnaround and licensed insolvency practitioners. Keith was nominated for Turnaround Practitioner of the Year 2014 at the National Insolvency and Rescue Awards in 2014.
These are the common worries about CVAs that we have heard over the last 20 years or so of doing them.
This is the most common worry. But YES they will supply you. They need to maintain their sales to your company, as much they don’t like losing the money owed. We spend a lot of time on creditor liaison and it is very rare that a supplier will not supply.
It is possible that if a creditor has to be paid in full for the benefit of other creditors i.e it stops the company being unable to trade, or allows the release of goods, then it is possible that they can sit outside the CVA and so paid in full. Any such payment will have to be declared to the other creditors so it has to be justifiable in the circumstances. This is not the same as a preference where you desire to make one creditor better off than another such as an associated firm or a relative.
By carefully explaining what the company is doing, how it will be in their best interests and asking them to work with the company and ourselves we ensure that creditors are kept informed and on side. Don’t expect any credit terms or any favours. But being honest and open with them pays dividends in the long run.
In the end not paying your suppliers on time and having them issue threats is even more detrimental to your business. If we think you can pay them back completely over time then we can always look at a time to pay arrangement whereby we do a deal to pay back all of the debt over an extended period.
Also do not forget that a CVA can be 100p in the £1 and that is binding on all other creditors.
You are trying to maximise creditors interests by doing the CVA, and therefore it’s in their interests to work along with the plan.
No you will not. In over 500 cases people have said this to us and we do understand why. However, in practice we have rarely seen a customer walk away from a business that is delivering its products and services; well and on time. This should be your focus. Stop fire fighting and get back to your main role in the business. This way customers will stick with your company. If you continue to focus on the fight for survival rather than maintaining good service sooner or later your performance will fall and their business may suffer. This is when you will lose your customers.
Many people think they cannot tell their customers that they are doing a CVA or they will walk away. That is your decision and one that should be based upon knowledge of the business relationship, their requirements and any contracts. Sometimes the best answer is to tell them with us in attendance. Often this is better than a competitor telling them that you have gone bust?
Think what you would feel if a major supplier did not tell you of their problems and their plans to deal with it, but instead they hear from a local rival that you have gone into liquidation?! It is best to be upfront and honest, and explain your plans to maintain and ultimately revive the business.
Generally they will stay. If they walk out they will lose any employment rights and will not receive any redundancy, lieu of notice payments from the company or the DBEIS. Furthermore, they will not be eligible (generally) for unemployment/job seekers allowance. So we recommend being open and honest and working out a plan for and with the employees. Proper communication is vital. Some employees may lose their jobs as part of the restructure; this is painful and at times inevitable. We can work with you to to make the process as simple as possible.
Again this is simply not true, as long as a cogently structured plan and a well, presented approach to the bank is used. Most banks are now much more supportive of out of court restructurings like a CVA as it avoids the usual huge asset meltdown and costs of say administration. Although the CVA cannot affect the rights of the bank or lender they are stakeholders and should be closely involved in the process.
Yes they will if it is a properly structured, well thought through plan and the company has been compliant with tax rules (i.e. filed the relevant returns) in the past (being on a time to pay deal is being compliant!). It is also advisable that the directors have filed their own tax returns on time! The HMRC agency that decided on these proposals is called the Combined Voluntary Arrangement Service. Currently, it votes in favour of c. 70% of all proposals. However, we have a >70% approval record. Please read our latest page on the HMRC and the CVA Process also our page on the Voluntary arrangement service and CVAs
No you won’t. Even if the company’s assets are transferred to another business in the form of a “hive down” then the losses can be transferred provided some certain conditions are met. For more details read our CVAs and corporation tax issues page here
Regulators can, typically, intervene and or remove a company from service provision. But that’s likely to be a HUGE headache for the regulators and they need to have a strong reason to do this and maintain control over clients, client files and ensure any replacement provider is fit for purpose. But they will do this if the provider is non-communicative and or they fear uncontrolled insolvency-led closure.
And so proper and informed communication is critical to ensure that the right message is delivered by the company and is advisors. KSA has worked with regulators across the business spectrum including Road Traffic Commissioners, the General Dental Council and the Solicitors Regulation Authority for example.
Yes any regulator can take action if it feels that services are at risk, but business as usual with and experienced, expert guidance from KSA will usually persuade the regulator that a planned solution is viable. It may lead to the need for future newcos to hive contracts to or indeed to tender for new contracts
Still got questions? Then click here for CVA FAQs or here for a flowchart. Alternatively give our team of advisors a call on 0800 9700539 now, or contact us by email: keiths@ksagroup.co.uk
What is a CVA? | Company Voluntary Arrangements Explained
A CVA or Company Voluntary Arrangement is a legally binding agreement with your company's creditors which allows a proportion of its debts to be paid back over time. 75% of the creditors, by value, who voted need to support the proposal.
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Pre Pack Administration Process and Procedures
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Worried Director What Will Happen To Me After Liquidation?
"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director. If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020. Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly. I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim. This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork". It isn't worth the risk. If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP) or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at help@ksagroup.co.uk
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Notice of Intention To Appoint Administrators
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What Is A Winding Up Petition By HMRC or Other Creditor
A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.
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