Earlier this year, BDO was appointed administrator of the alternative energy company Vphase Plc. and Vphase Smart Energy Ltd., both based in Chester. It has now been revealed a CVA proposal has been approved at a creditors meeting. The aim of this is to give unsecured creditors a chance to see return.
Founded in 2004, Vphase has suffered trading problems due to recent government rulings, like the Green Deal and ‘bedroom tax’. As an alternative energy company, they were finding that housing associations and local councils wanted to use less of their services in a bid to cut down energy bills. The impact of the bedroom tax showed that tenants would struggle paying their bills on top of paying for energy efficient services. Vphase tried to continue trading by applying for additional funding, however, this unfortunately failed and administrators were appointed this September.
One of the largest shareholders, Henderson Group Plc., has agreed to the CVA in order to benefit creditors as well as maintain some of the control in the company. Usually CVA's can only be approved at a meeting if 75% of creditors “by value” agree to the proposal. In this case, Henderson had control over the whole process. It has been reported that creditors will receive dividends of 55p in the £1; note that if the CVA had not been accepted, it would only be 36p in the £1.
The company’s assets were sold after the business was placed in administration, however the CVA still needs to be approved by the court in order for debt to be repaid to unsecured creditors. A CVA is a way of exiting the administration to keep the company trading as well as keep costs down. For more information, visit our administration followed by CVA page: https://www.companyrescue.co.uk/company-administration/administration-followed-by-a-cva.
A CVA is a powerful tool in the insolvent process and can act as a cost-effective alternative to administration. By reviewing and restructuring the business, it can turn a company around and improve cashflow as well as stop pressure from VAT and tax. Find out more in our video below, where Keith Steven explains what a CVA is and how it can benefit your situation.
What is a CVA?
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