FAQ

CVA

  • Is a CVA the right solution for my company?

    Insolvent Solutions will help you and your directors decide whether a CVA is the right answer for your company. We will consider your business plan, financial forecasts and company history and devise the best way forward for your business. We will also help you decide if the company has a viable future, if problems faced by the business have been overcome, whether the CVA will be affordable in the long term and what future problems the business may encounter if it is to continue. Insolvent Solutions act for you, not your creditors, and together we will decide if a CVA is the appropriate action for your company.

  • What is required of the directors?

    With the help of an experienced practitioner from Insolvent Solutions, directors must first decide if a CVA is the appropriate answer to the company’s debt. If the process is agreed, the directors must then work alongside Insolvent Solutions to provide the necessary information needed to draft the CVA proposal including details of your company forecast, business plan and a statement of affairs, creditor liaison and information on how much you can afford to pay each month. The proposal should then be reviewed and altered if necessary by the company’s directors before being filed at court.

  • How much will a CVA cost me?

    Each CVA case is very different from the next and we believe in offering an individual service for each client so do not offer a fixed price CVA. That way, we can ensure you do not pay for services you do not need and can find the most cost-effective solution for your business. In addition, an initial telephone consultation and the first meeting with our trained insolvency expert is free.

  • Do all my creditors need to come to the meeting?

    No. All creditors and shareholders must be given at least fourteen days notice of the creditors meeting to have the opportunity to attend or be represented by a third party. They can then vote in person, via their representative or by post. If the CVA proposal is passed, all creditors are then legally bound by it, regardless of whether or not they or their representative were present at the meeting.

  • Will details of my CVA end up in the papers?

    No. A CVA is a private matter so the company will not appear in the papers as it would if it were to enter into administration.

  • Does the CVA include debts to my bank?

    If any borrowing is unsecured, it can be included in the CVA but any secured borrowing is not legally bound by the CVA order.

  • Should we stop trading while the CVA proposal is being drafted?

    No. The activity of the company should continue as normal and debts to creditors should not be increased or decreased in that time.

  • Should we tell our employees?

    We always advise our clients to be honest with their employees as they will play a vital role in guaranteeing the company’s long term future. Communication eases the process and also allows your staff to assess their options in case redundancies are part of the restructure. Insolvent Solutions can help you decide on the best way to approach this and can guide you through the process.

  • Should we tell our customers?

    At Insolvent Solutions, we believe honesty is the best policy. Of course, whether you tell customers you are under a CVA is ultimately your decision based on your knowledge of the working relationship you have with each customer. However, our experience has shown us that customers always prefer to hear details of the CVA from the company in question, rather than from a third party, and an expert from Insolvent Solutions can be present when you inform customers if this is preferred.

  • Can we make changes to the CVA once it is approved?

    Yes and Insolvent Solutions can help you do this as and when it may be necessary. If the company finds itself struggling to make the repayments, for instance, a CVA Variation Order can be arranged, which must be again be voted in favour of by 75% of the creditors. Providing your situation does not change from the time the CVA proposal is first drafted however, we are confident we will structure the proposal in such a way that repayments will remain affordable for the duration of the CVA order.

  • Will the bank support my company's CVA?

    Insolvent Solutions have years of experience dealing with banks and can ensure your company stands the best possible chance of securing their support. We have found they are generally supportive of restructuring such as a CVA as it avoids the costs of administration. We also know the banks prefer to be approached with a properly structured and detailed CVA proposal so they know the matter is being taken care of and your company has the best possible chance of survival.

  • Wouldn't it be easier to just liquidate the company?

    Not necessarily. There are always risks involved when a company is liquidated including the possibilities of being made liable under the Companies, Insolvency and Criminal Justice Acts and disqualification as a company director. Furthermore, the costs associated with liquidation are much higher and it comes with added stigma that a CVA avoids. Liquidation also erodes all goodwill that exists towards both you as a director and your company, can increase creditors demands and reduces the value of your assets.

  • I've heard I'll have to pay 100% of my debt and I know I can't afford that.

    That's simply not true. There is no minimum or maximum amount that should be paid with a CVA. This will be set according to your needs and its affordability in a well structured proposal. There is no legal amount that should be paid and in our CVA deals, the average amount repaid is around 30p in £1.

Liquidation

  • Is liquidation the right solution for my company?

    Insolvent Solutions will help you and your directors decide whether liquidation is the right answer for your company. We will consider your business plan, financial forecasts and company history and devise the best way forward for your business. We will also help you decide if the company has a viable future or if the company is insolvent and can no longer continue trading. We recognise that liquidation is a very serious step to take and will ensure that our confidential expert advice helps you decide if liquidation is the appropriate action for your company.

  • What is required of the directors?

    With the help of an experienced practitioner from Insolvent Solutions, directors must first decide if liquidation is the appropriate answer to the company’s debt. If liquidation is agreed, the directors must then hold a general meeting of share holders to confirm this decision and place the company into liquidation. This should all happen before a meeting is held with creditors.

  • Who pays the liquidator?

    The directors or shareholders must pay the liquidator.

  • Do all my creditors need to come to the meeting?

    No. Insolvent Solutions will inform your creditors that the company is entering into liquidation and all will have the opportunity to attend the creditors meeting. However, in our experience, these meetings are usually straightforward and simple and creditors usually choose not to attend, but they remain a legal obligation so must be held. Any creditors who do attend have the right to ask questions about why the company failed and raise any further issues with the directors.

  • Will details of the liquidation end up in the papers?

    Yes. The creditors meeting must be advertised in the London Gazette and in two local newspapers. The appointment of the liquidator will then also be advertised in the London Gazette and in one of the local newspapers.

  • How will the bank react when they discover the company is to be liquidated?

    The bank will continue to allow payments into the company's account but will stop all payment out of the accounts. If the directors have given personal guarantees to the bank, it is possible the bank could take action to recover their money from you.

  • Can I pay my employees before I liquidate the company?

    While your intentions may be honourable, it is best not to do this and take advice from Insolvent Solutions. Once employees are made redundant upon the company’s liquidation, they will receive payment from the Redundancy Fund including arrears and holiday pay. The government can later reclaim this money if a company is found to have adequate assets upon liquidation.

  • I have not paid PAYE or VAT. What action will HM Revenue & Customs take?

    In both cases, failure to pay this is a criminal offence so HM Revenue and Customs can take steps to make you personally liable for the debt. However, if it can be shown that directors have done their best to pay and the debt is relatively small, in most cases no further action will be taken.

  • What is phoenixing and can I do it?

    Phoenixing is when directors buy the assets of one company and use these to set up a new similar business. There are strict laws governing this process though, so please see our separate phoenixing section and contact Insolvent Solutions for more information.

  • Can I start another business using the same name?

    With caution. This is possible but only if strict rules are followed to avoid criminal action. Insolvent Solutions can guide you through this process if required and ensure you avoid any potential criminal action.

  • What is wrongful trading and how do I avoid it?

    Wrongful trading is when directors are aware a company is terminally insolvent and continue trading or taking credit. It can also be when a company does not file annual returns or accounts at Companies House or does not operate the PAYE or VAT scheme correctly. Directors are required to act responsibly to avoid wrongful trading and Insolvent Solutions can give you further guidance on this to ensure it does apply to your company.

Phoenixing

  • Is phoenixing the right solution for my company?

    Insolvent Solutions will help you and your directors decide whether phoenixing is the right answer for your company. We will consider your business plan, financial forecasts and company history and devise the best way forward for your business. We will also help you decide if the company has a viable future, if problems faced by the business have been overcome and what future problems the business may encounter if it is to continue. Insolvent Solutions act for you, not your creditors, and together we will decide if phoenixing is the appropriate action for your company.

  • Why is phoenixing controversial?

    Phoenixing is often viewed controversially because it is mistakenly seen as a way of ‘getting away’ without paying a company’s creditors. Indeed, the new business is often allowed to use the same premises, a variation of the old name and even retain the same customers and staff but, crucially, does not take on the old company’s debt. It is not necessary to gain permission from the creditors to do this, as it is hoped this would preserve the value of the assets and so give the best possible return to any creditors. If the company were merely to go into liquidation, its assets would be likely to quickly reduce in value, leaving the creditors with a much smaller return, if any.

  • Will a phoenix company take the old business liabilities on board?

    All liabilities – with the exception of employees claims which are transferred to the phoenix company – will remain with the old company and will usually be liquidated. If the phoenix company wishes to take over any assets that are subject to lease or hire purchase agreements, these must be negotiated separately with the leasing companies and Insolvent Solutions can do this on behalf of the phoenix company.

  • Should we tell our employees?

    Insolvent Solutions can help you decide on the best way to approach this and can guide you through the process. All employees’ rights including holidays must transfer to the new company under TUPE (Transfer of Undertakings) law. It is vitally important that this is done correctly and legally and Insolvent Solutions can take care of this for you.

  • Should we tell our customers?

    It's up to you. If they will not be affected by the process, then it is entirely possible to continue trading without any disruption to the service you provide. However if the customer owes money and the debt has not been bought as an asset by the phoenix company, the insolvency practitioner will write to them requesting payment.

  • Will I be disqualified as a director of my new company?

    Not necessarily. It is practice for the liquidator of the old company to submit a Disqualification Report to the Department for Business, Enterprise and Regulatory Reform, but this will consider only the directors of the old business that has entered into administration. It will not consider the phoenix company in any way or anyone associated with the new company that was not a director of the old business.

  • Will I still be responsible for any personal guarantees?

    In most cases, yes. While phoenixing solves a company’s debt problems, it does not solve any personal debt issues such as bank loans and overdrafts. If any outstanding debts were guaranteed by company directors personally, it is possible that action could be taken to recover money from them.