Steering your company through choppy waters
What do Store Twenty One, Travelodge, Mamas & Papas, L A Fitness, Fitness First, Bella Italia, JJB Sports, Blacks and Café Rouge have in common?
They are all well-known brands, which over the past few years, have entered a Company Voluntary Arrangement (CVA), steering them through choppy waters with varying degrees of success. Their activities are largely in the retail and hospitality sectors.
A Company Voluntary Arrangement (CVA) is a procedure which allows a financially troubled company to reach a legally binding agreement with its unsecured creditors, allowing it to repay all or part of its debts over an agreed period, steering it back to success. It is only one of several measures which can help address financial problems.
CVAs often enable a company to significantly reduce its overheads, and in a short time scale. The arrangements are particularly popular in the retail sector, or with companies which have large property portfolios. If a company is tied into historically high rents and suffers a significant drop in sales, the business model may no longer be viable. Part of a CVA proposal may be to renegotiate those rents.
Unlike other insolvency procedures, the directors remain in control of the company’s day-to-day operations.
High profile companies who’ve used CVAs:
| Store | Period in CVA | Website |
|---|---|---|
| Store Twenty One
|
July 2016 | storetwentyone.co.uk/ |
| Travelodge
|
July 2012 | travelodge.co.uk |
Mamas & Papas |
September 2014 | mamasandpapas.com |
| Fitness First
|
June 2012 | fitnessfirst.co.uk |
| Bella Italia
|
June 2014 | bellaitalia.co.uk |
| JJB Sport
|
April 2009 & March 2011 | jjbsports.com |
| Blacks
|
November 2009 | blacks.co.uk |
| Café Rouge
|
June 2014 | caferouge.com |
How a CVA works
A fundamental feature of any CVA proposal is that the company makes a regular payment which it can afford (based on financial projections). That payment is divided amongst creditors on a pro-rata basis.
In theory, this gives the company breathing space, allowing it to trade out of its difficulties.
It gives it time: Time to put together a new business plan, time to restructure finances, time to recover after suffering a bad debt, time to finish a profitable contract, and time to sell assets. Time is of the essence – taking prompt advice can make the difference between survival and failure.
A CVA needs determined directors, the co-operation of creditors, and can only be arranged with the help of a licensed insolvency practitioner.
In summary
Company Voluntary Arrangements (CVAs) have been used by a number of high-profile companies, allowing them to repay their debts in affordable instalments. Doing so allows the company to recover from its difficulties and plan for a possible future. They also allow the directors to maintain a level of control over the company for the procedure’s duration.
At Wilson Field, we have a team of licensed insolvency practitioners and skilled advisers to help turn around businesses; steering them in the right direction. They have a wide range of experience from backgrounds in accountancy, business, insolvency and banking. If you would like a confidential, no-obligation chat about your business, speak to one of our friendly advisers.