Creditors more realistic about Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement (CVA) has hit the headlines again with outdoor and leisure retailer Blacks trying to agree one with its creditors. This provides more evidence that creditors understand the value of a CVA in the business turnaround of a struggling company.
According to recent reports, outdoor and leisure clothing retailer Blacks Leisure, (Blacks, Millets and Free Spirit) is likely to agree a Company Voluntary Arrangement with its creditors within the next few weeks. This agreement will allow Blacks to close unwanted stores, and gain the support of its creditors to survive.
In a nutshell, a CVA is an agreement where a company's creditors decide to accept reduced payments and write off debt. This frees up cash by reducing the debt burden on the company allowing it to continue to trade. As a result of the CVA, creditors not only agree that they will write off a certain amount of the money that they are owed. They also have the opportunity to continue to trade with the company into the future. This is certainly a better prospect than the total failure of the business and the likelihood that there will be no returns for creditors at all.
As with many business recovery service solutions, CVAs have attracted some criticism. Creditors argue that they are forced to accept the terms of a CVA because if they do not, they are threatened with the closure of the company and that they will be left with nothing. In fact, this argument is flawed because a company would only consider a CVA in the first place if it is struggling to repay its debts and facing liquidation. If this situation were allowed to happen, the creditors would be very likely to lose everything anyway.
A Company Voluntary Arrangement is designed to save the business and at least get some return for the creditors. It is not a method of simply avoiding paying the company's debt. It is seen a more consensual business rescue option than others such as pre-pack liquidation as it requires the approval of 75% of the value of voting creditors to be accepted and set in place. Without this, the CVA cannot be implemented.
In an article in the Sunday Times on the 27th September (http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article6850821.ece) the author suggests that Company Voluntary Arrangements are most often used by retailers to reschedule their debts and close under performing stores. It is true that during 2009, there have been a number of high profile retailers who have used the CVA solution. Notably JJB Sports plc, Stylo plc and Focus DIY plc have all put forward CVA's (although Stylo's was rejected by the creditors). However, the CVA solution can be used by any struggling business whatever its size which needs to renegotiate the debt it owes to its creditors in order to survive.
Print Your Own Business Cards For Free
By: Elizabeth | 10/12/2009Print your own business cards for free as the business card is probably the most essential representation of an organization as well as an individual, is something that reveals and provides a true recognition to what business card holder is associated with. The information that is contained in a business card includes the details about an individual’s name along with the contact and address details with the specific mentioning of what a person is involved with.
International Travel Concerns for Business Owners
By: Joe Smith | 10/12/2009Travelling internationally requires more than a phone directory or directory assistance. Business owners love mobile concierge services that keep their employees safe and on time while travelling internationally.
International Travel Concerns for Business Owners
By: Joe Smith | 10/12/2009Travelling internationally requires more than a phone directory or directory assistance. Business owners love mobile concierge services that keep their employees safe and on time while travelling internationally.
Retail Crisis Managers: Today’s Small Business Heroes
By: Rick London | 09/12/2009When you opened your retail store you never thought you would hear the terms “liquidation specialist” or “retail crisis manager”, much less need the services of one. You started your small business from scratch. It grew. It made a profit. It became established and people began treating you differently. You enjoyed it. But things have suddenly changed.
CONVERTIBLE DEBT Why these solutions make sense in 2009?
By: Allan Mccall | 09/12/2009CONVERTIBLE DEBT: Why these solutions make sense in 2009? (Abhishek Uppal) Overview of Convertibles Convertible debt may be structured as a senior or subordinated debt that is convertible into common stock at a fixed ratio at the option of the holder A semi-annual tax deductible cash coupon is paid on the security Flexible call / put provisions to meet specific needs Maturity is typically 20 - 30 years Principal amount at maturity (or potentially on a put date), if not conv...
Digital Media Ad Network Business Models
By: Clay Hanson | 09/12/2009Digital Media: Affiliate Marketing (Abhishek Uppal) Advertisers are increasingly outsourcing the management of their affiliate programs to third-party affiliate agencies. As the affiliate channel becomes an increasingly important channel for advertisers, the advertisers will see the benefits of outsourcing, including best-of-breed management techniques and management stability. Several affiliate agencies were created over the last year to take advantage of this new opportunity. ...
Digital Media Ad Network Business Models
By: Clay Hanson | 09/12/2009Digital Media: Ad Network Business Models (Abhishek Uppal) The ad networks typically take on one of three business models: dynamic network, the traditional ad-network, and ad representation. Dynamic Network Model Under this model, the ad network will buy inventory from the publisher's sites in advance at a specified rate, group the inventory and select the best types for each advertiser, and resell the inventory to an advertiser or agency at a higher price. Given that there are...
International Mobile Phone Distributor Changing the Landscape
By: Dan Goldman | 09/12/2009More mobile phone distributors, resellers, and traders are turning to Acromedia Ltd. for their mobile phone sourcing needs. Acromedia is a leading international mobile phone distribution source in the global marketplace delivering supply-chain solutions around the globe.
Increased company financial trouble will result in more winding up petitions
By: Derek Cooper | 30/11/2009 | Small BusinessDebt collection strategies such as the issuing of winding up petitions are likely to be more widely used as the number of companies in financial difficulty continues to increase into 2010 and 2011.
How Do I Liquidate My Company
By: Derek Cooper | 23/11/2009 | FinanceIf you have determined it is time to close your company either because it is bankrupt and cannot continue or you want to stop trading for some other reason then you need to go through a liquidation process. The most common form of liquidation is creditors voluntary liquidation (CVL). A...
Is your company in financial trouble - consider a Company Voluntary Arrangement
By: Derek Cooper | 20/11/2009 | ManagementIf your business is in financial difficulty, you may be better off undertaking a Company Voluntary Arrangement rather than struggling to raise the funds necessary for a Pre-Pack Administration.
Company Voluntary Arrangement for Business Rescue
By: Derek Cooper | 16/11/2009 | CreditIn the economic downturn a number of businesses are are finding trading difficult. If it looks like your business is unable to pay its bills and is therefore facing insolvency, particularly where there is a large debt burden, a company voluntary arrangement (CVA) may be a good solution to turnaround your business.
A lump sum Individual Voluntary Arrangement can solve personal debt problems for Self Employed
By: Derek Cooper | 11/11/2009 | Personal FinanceFor a Director, Sole Trader or someone who is self employed, if your business has failed, you may not be in a position to maintain monthly payments into an IVA. There is an alternative lump sum IVA which may well be the right personal debt solution for you.
HMRC Fast track Time to Pay Scheme likely to close at year end
By: Derek Cooper | 11/11/2009 | Small BusinessThe government's tax and VAT Time to Pay scheme designed to help companies with their cash flow during the recession, may be more difficult to use if the business support centre is closed. Whatever the outcome of the changes, it seems likely that the number of business insolvencies will continue to increase into 2010.
4 options to solve debt problems for the sole trader
By: Derek Cooper | 20/10/2009 | Personal FinanceMany sole traders and the self employed prop up their business with personal borrowing. If things go wrong, the individual is left with large personal debt which they cannot repay. What options are there available to resolve these problems?
Creditors more realistic about Company Voluntary Arrangement (CVA)
By: Derek Cooper | 07/10/2009 | CorporateAnother Company Voluntary Arrangement (CVA) is in the headlines again as outdoor and leisure clothing retailer Blacks is planning use one to resolve its financial difficulties. This just highlights how much creditors now accept a CVA as a method of business rescue for companies with financial problems.