A CVA, otherwise known as a company voluntary arrangement, allows you to protect your company against legal action, as with administration, but with the purpose of creating a legally binding payment plan with your company’s creditors. The cva is tailored around your company’s cash-flow so that your company’s debts can be repaid, either in part, or in full over a maximum of five years. A cva is initiated by you (the director), not the creditors, shareholders or an administrator.
When used correctly, a cva can provide a perfect tool to renegotiate troublesome trade agreements as well as landlord leases whilst allowing you to trade on through a financially challenging period. This solution should only be considered if you believe your company is viable, but needs some help to trade through.
A CVL is also known as a creditors voluntary liquidation. It is a solution that allows you to close your company with or without the permission of creditors and it allows you to write off unsecured debts under your company’s name. This type of liquidation is initiated by you (the director), not the creditors as the name may lead you to believe. It is critically important to make sure that you choose a firm that has your protection as their priority when considering liquidation. There can be serious personal implications if you commit to a company that provides sub-standard services. Be aware of any firm that tries to keep you at ‘arms-length’, with minimal investment on their part. To be sure, always ask to speak with previous clients as testament to their services before committing to any company to carry out a creditors’ voluntary liquidation.
A pre-pack can refer to pre-pack administration or pre-pack liquidation, either way, the solution involves having a future buyer lined up to purchase the more profitable parts of the business, whilst leaving the debts behind. It is important to obtain specialist help immediately if you think this may be a viable solution for your company as strict procedures must be followed if you, as a connected person, are considering purchasing your company’s assets. Nevertheless, if your business is generating revenue producing contracts, has sizable assets or properties, but they are under threat from serious litigation or angry creditors; a pre pack administration can provide a very powerful legal solution for you and your company.
Administration is a very powerful legal tool that can be used to; first, stop legal action against your company and then:
Get a better return for the creditors than would be obtained via an immediate liquidation, or rescue your company from financial difficulty as it provides you with more time allowing for a rescue strategy to be put in place.
Get a better return for the creditors than would be obtained via an immediate liquidation, or rescue your company from financial difficulty as it provides you with more time allowing for a rescue strategy to be put in place.
There are two key tests/questions that apply to companies when defining whether it is insolvent or not and they are:
- The cash-flow test: Can the company pay its bills when they are due? If the answer is ‘No’, then your company is likely to be insolvent and you should seek advice.
- The balance sheet test: Do your company’s debts outweigh the company’s assets?
No. Insolvency doesn’t have to spell the end for your business as there are a number of tools that we can use to secure both your future and/or your company’s future whilst protecting you fully and minimising any potential risks.
Around 70% of directors have a problem with an overdrawn directors loan account at some stage. Most commonly, the director seek advice from an accountant who tells him/her to take a minimum salary in order to keep national insurance and tax at the lowest levels and to then take dividends to supplement their income. This then causes an unpaid debt which is owed to the company. This is very acceptable tax advice until something goes wrong which could be a sharp, unexpected drop in revenues for whatever reason or a threat of a winding up petition from HMRC.
The directors then become debtors (someone who owes money) to the company and any liquidator, especially the official receiver who may be acting on behalf of HMRC, will pursue the director to the point of bankruptcy, if the debt cannot be repaid.
The directors then become debtors (someone who owes money) to the company and any liquidator, especially the official receiver who may be acting on behalf of HMRC, will pursue the director to the point of bankruptcy, if the debt cannot be repaid.
Around 70% of our work involves HMRC in one way or another, including providing advice on distraint warrants, winding up petitions, negotiated settlements, time to pay arrangements, field officer visits, compliance team visits and more.
In the vast majority of cases you pay us nothing at all.
When an insolvency solution is required such as a cva, administration or liquidation - we get paid for all of these by completing the field work for the insolvency practitioners, making less work for them. This relationship benefits you in more than one way: As you may already know, once an insolvency practitioner is engaged by your company they are duty bound to work for the people/businesses that your company owes money to, therefore, cannot look after you personally. So once engaged, an insolvency practitioner cannot address any potential personal implications that may be directly caused by the insolvency process as it would be a direct conflict of interests for them to do so.
Jameson Smith & Co will make sure that you are fully protected from start to finish, whilst working with the insolvency practitioners so you have full peace of mind.
When an insolvency solution is required such as a cva, administration or liquidation - we get paid for all of these by completing the field work for the insolvency practitioners, making less work for them. This relationship benefits you in more than one way: As you may already know, once an insolvency practitioner is engaged by your company they are duty bound to work for the people/businesses that your company owes money to, therefore, cannot look after you personally. So once engaged, an insolvency practitioner cannot address any potential personal implications that may be directly caused by the insolvency process as it would be a direct conflict of interests for them to do so.
Jameson Smith & Co will make sure that you are fully protected from start to finish, whilst working with the insolvency practitioners so you have full peace of mind.
A directors' personal guarantee is essentially a promissory note to pay an organisation regardless of your company failing or going into liquidation. At some stage you may have signed an agreement with the bank or another trade creditor, making you personally liable for a specific debt. Once you realise that your company is heading towards insolvency you should seek advice on how to tackle this situation immediately if you are in any doubt about what to do.
Banks will often support personal guarantees with a charge on the family home and, or a debenture usually a fixed and, or floating on the company assets.
We specialise in helping directors address their personal guarantees and providing solutions to allow the directors to exit the situation in the best financial shape possible.
Read our page on directors' personal guarantees for more information on how we can help you.
A winding up petition is the application for a forced/compulsory liquidation of a limited company or partnership. This is usually initiated by a creditor (person/business that your company owes money to). Winding up petitions should never be ignored. There can be serious implications if communication with the relevant creditor or immediate action is neglected at this stage.
A statutory demand is a documented written request, usually sent from a creditor for payment of a debt that is owed. You would have 18 days to negotiate a settlement or ask the court to set-aside (dismiss) the demand. If no settlement is made after 18 days from receiving the statutory demand you are given a further 3 days to pay in full. This is a very serious document and should not be ignored in any circumstances. After the 21 day period has lapsed and if there is no response to the document, the creditor can then petition to court for a winding up order for a debt as little as ￡750.
