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What is a Company Voluntary Arrangement with Hive

31st May, 2019
Keith Steven

Written ByKeith Steven

Managing Director


07879 555349

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.

Keith Steven
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  • Hive Up
  • Hive Down

When meeting directors they usually like the option of a Company Voluntary Arrangement , but they do have the obvious worries about future trading.

Common ideas include “we want a CVA to restructure the business, but we are worried that our intellectual property would be put at risk”. Or “if we do a CVA, we may be unable to tender for new contracts”. Or “why would our client continue to work with a company in a CVA”?

So, what are possible solutions to these problems? Here, at KSA Group, we are pragmatic experts who will always try to help you find solutions. By using a CVA we can restructure viable but distressed companies. Sometimes this requires solving complex problems that can mean a standalone CVA is not sufficient.  In appropriate circumstances we have used the following methods to address such complex scenarios.

Hive Up

What is a Hive Up?

Hive essentially means “to move”. An asset, or the whole business can be ‘hived’ up to a currently existing or newly formed GROUP company, we call this “groupco”.

This can be a really clean vehicle that is either newly incorporated or a company that already exists in the director’s or group portfolio. It will often have a clean balance sheet, no existing liabilities, but of course, a low credit rating, often 40-50 out of 100 or so.  But of course, this is better than having no rating, post CVA.

Moving assets within a group is not usually a problem for taxation (though we do stress that we are not tax experts and you should take your own advice from tax experts).

OR groupco can acquire the business of oldco through a business asset sale. The trading business can then make payments for the purchase of the assets to oldco, which in turn uses the receipts as the contributions into a company voluntary arrangement .

Alternatively, a newly formed company can acquire the shares of the trading company (“oldco”) which is going into a CVA, for nil or low value as the equity of the existing oldco company is often worthless.

Usually before deciding on hive up, hive out or hive down, we recommend getting an independent valuer to provide a business asset valuation.

Each situation needs careful assessment to decide the best method – call us to arrange a meeting with one of our KSA directors or regional managers to find out more.

Hive Down

What is a Hive Down?

The board of oldco decides to sell some or all of the assets to its newly incorporated subsidiary company, called “bottomco” and the consideration (price) for this transfer is the shares in bottomco, or a cash payment can be made. This is effectively a swap of value for shares.

Perhaps bottomco could raise new funds to achieve this. The providers of such funds must consider taking appropriate security and or the bank debt in oldco can be novated down to bottomco.

Topco is now an insolvent company, with modest or zero assets other than the shares held in bottomco which are in effect not worth anything much. It enters into the CVA – company voluntary arrangement – to repay its unsecured creditors say 30p in £1 over 5 years, or 75p in £1 in 3 months. Bottomco may then pay this to Topco in consideration for the release of the shares.

After the CVA ends, Topco could be wound up or left as a holding company for example. The people involved may buy the shares from the liquidator after a valuation from an independent party.

This process avoids what is known as “transaction at an undervalue” which is a possible breach of s238 Insolvency Act 1986.

As ever this is only a general guide, we cannot cover every scenario, so if you have a question or problem talk to us soon.

Keith Steven – Managing Director KSA Group Ltd

Call 07974 086779 or 0800 9700539 today

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"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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