If a company has a viable future, the directors accept the need for change, are prepared to fight for its survival and appropriate funding can be found, then you might be surprised about the options available.
To begin with it might be as simple as a well constructed business recovery plan that can allow a company to improve Its cash flow and trade out of Insolvency.
Lets look at the key areas of recovery planning;
A business recovery plan should accurately reflect the current standing of a company. This can often clear the air and give the company a new focus; it may be sensible however and even cost effective to employ the services of an Insolvency Practitioner.
There are important legal issues to be considered and areas (such as tax savings), that are often identified. The costs of an external recovery plan are usually offset by the additional cost savings that are made.
If your business is struggling and you haven’t yet created a business recovery plan, you might still have time to do so. We can help find ways to cut costs and to take advantage of insolvency laws. We will examine every aspect your business and can help implement a fast and effective action plan. The peace of mind this brings is considerable.
What to include in your business recovery plan – your plan should identify the most important areas of your business.
- Which are the most basic departments you need to keep your company running?
- Which key documents and other items do those departments need to operate in the short term?
- Specify the necessary equipment. It may include software and hardware for the technology department as well as business equipment and spare parts.
- Create a basic operating budget detailing all expanses.
- Find out the minimum financing you need to keep your business running.
Next put together an action plan.
- Describe each task, items required, department, the responsible parties and their contact information.
- Specify who is responsible for taking care of each area should disaster strike. This way, there is no confusion during a crisis and your business can take quick and decisive action.
A business recovery plan is, in most cases, an opportunity to start again; having assessed your business’s weaknesses and the potential for change, opting for such a move is an effective way to change management strategies, approach problems from a new angle, alter the ways in which goods and services are provided, or generally refresh business and renew interest.
In Instances where sever financial problems exist, which put the future of the company at risk, there are powerful legal ways to ring fence a business whilst a solution is found.
If a company has a viable future, a Company Voluntary Arrangement (CVA) can be a powerful tool. Through avoiding liquidation a CVA focuses on paying creditors what you can afford out of future profits.
What is a CVA?
A Company Voluntary Arrangement (CVA) is a formal arrangement between a company and its creditors. The arrangement highlights that at present the company cannot pay its debts but will be able to out of future profits. The business will pay towards its debts for an agreed period and once completed remaining debts are written off.
Vital Components of a successful Company Voluntary Arrangement (CVA) are:
- A viable business that can return to profitability.
- Commercially structured – can succeed without over promising creditors
- Introduction of appropriate levels of working capital in addition to the restructuring of debt.
- Management accepting that change is necessary.
- Determination & hard work is essential throughout the period of the CVA
- Directors need to use an experienced Insolvency Practitioner.
- Cautious forecasting.
Who can propose a CVA?
A CVA may be proposed by the directors of the company. When the company is in administration, the administrator can propose a CVA. A CVA can only be proposed if a company is insolvent or contingently insolvent.
How long does it take?
In practice it often takes 7-10 weeks although the summary below is possible if all of the required information is available from the outset.
Summary of the CVA mechanism.
It is also worth pointing out that the CVA is not a panacea for your company; but it is a very powerful framework for change and protection of a distressed but viable company. In reality although difficult to propose and get approved, getting the CVA approved is the easiest part of a rescue/turnaround– making a turnaround work is much more difficult and needs professional help. The CVA should aim to:
- Maximise creditors’ interests.
- Preserve viable but distressed businesses.
- Preserve economic activity and save jobs.
- In time return value to the creditors.
- Provide a real prospect of a return for shareholders
If you need help, contact us.
For confidential advice regarding turning around your business, please call… We are on hand to help you deal with every aspect of such a decision, and can offer answers to your queries and doubts.
