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Fast-tracking company survival: How a fast-track CVA can help weather Covid storm

Bob Maxwell explains how a little-known insolvency process can offer a lifeline to limited companies as lockdown restrictions continue to hamper business operations.

23rd Feb 2021
Partner Begbies Traynor
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The continuing coronavirus pandemic has had a material effect on business operations up and down the country, and indeed across the world. Barely any sector has found itself immune as government-enforced lockdowns, social distancing restrictions, and changing consumer habits, has caused business interruption on an unprecedented scale.

As an accountant, you may be looking at options for those clients who have seen their business performance falter as a result of the ongoing pandemic, and it is likely you will be dealing with more clients than ever before who are experiencing varying levels of financial distress, as national and local restrictions push previously thriving companies into a perilous state.

Business rescue and recovery option

Amidst the challenging conditions, the good news is that there are a range of business rescue and recovery options available which could help save your clients’ ailing businesses. These can include undergoing a process of business simplification to streamline complex operating structures and allow it to run more effectively, through to sourcing additional finance to manage gaps in cashflow, or placing the company into an administration process to provide time and space to plot a route forward under the security of a moratorium.

Another option is for your client to enter into formal negotiations with creditors by way of a Company Voluntary Arrangement (CVA). A CVA functions as a formal payment plan entered into by an indebted company and its creditors. It works on the basis on using future income to repay existing liabilities, slimming outgoings in the immediate term, while allowing trade to continue.

Due to this, a CVA is only suitable for those companies which have a high chance of future success. Creditors will need to be convinced of this potential ongoing viability, as a CVA can only become legally binding once the proposal has been accepted by at least 75% (by value) of voting creditors. A CVA could be particularly useful for those clients who which can be used to stabilise companies experiencing a temporary period of financial distress.

Fast-track CVA

At the smaller end of the SME market, who still need help restructuring their obligations with creditor liabilities but perhaps don’t require the level of intervention a multi chain multinational company does, a fast-track CVA could be the answer.

Specifically aimed at smaller companies, a fast-track CVA aims to achieve the same broad outcomes of a traditional CVA, but within a much shorter time period. While the monthly repayments agreed during the process will continue over a prolonged period of time, typically between 3-5 years, the same as a traditional CVA, a company can exit a fast-track CVA after as little as just six weeks. This reduced level of professional involvement also means reduced costs for the company, meaning more of the monthly contributions can be distributed amongst creditors.

Insolvency practitioner

If you believe a fast-track CVA or an alternative insolvency process may be needed to help stabilise a struggling client’s business during these uncertain times, a licensed insolvency practitioner can help to identify the most appropriate turnaround strategy to help get the business back on the road to recovery.

 A licensed insolvency practitioner will be happy to speak to your client on your behalf, or as part of a collaborate meeting with both yourself and your client present. During this conversation both the benefits, and the potential drawbacks of any insolvency procedure will be discussed, helping you both understand what this would mean for your client and their business.

Business rescue is not a one size fits all solution; what may work for one company may be wholly inappropriate or ineffective for another even though the pain points being experienced may be similar.

By taking specialist insolvency advice, you can help to better advise your clients and maximise their chances of turning around their business fortunes.

To find out more about how a Fast-Track CVA could help your clients please visit



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