A Guide to Business Rescue Procedures

Many profitable and fundamentally viable businesses go through difficult periods. Sometimes, the financial fallout from these challenges can become too significant to manage informally. When your business is sound but is burdened by historic debt or overwhelming creditor pressure, a formal rescue procedure can provide the breathing space and legal protection needed to survive and thrive.

Our team of licensed insolvency practitioners specialises in rescuing businesses. We can advise on the best route forward, helping you to restructure your finances, protect jobs, and preserve the value you have built. The two primary procedures for rescuing an insolvent company in the UK are a Company Voluntary Arrangement (CVA) and Administration.

Find Out if Your Business Can Be Rescued

Company voluntary arrangement (CVA)

A CVA is a formal, legally binding agreement between a company and its unsecured creditors to repay a proportion of its debts. This repayment can be by way of a one-off lump sum or more commonly be spread over a set period of time (typically 3-5 years). It is a powerful tool for businesses that have a viable future but are weighed down by historic debt or onerous property leases. It can also be used as an exit route to restructure a company in administration.

When is a CVA suitable?

A CVA is often the right option when:

• The underlying business is profitable, but historic liabilities are causing cash flow problems.
• The directors wish to remain in control of the company.
• The business needs to finalise a restructure to overcome its financial difficulties.
• There is a reasonable prospect that the company can return to profitability if its debt burden is reduced.

The process & benefits of a CVA:

The directors, with our assistance, put a formal proposal to creditors outlining how much of their debt will be repaid. If 75% (by value) of the voting creditors agree, the CVA is approved and legally binding on all unsecured creditors.

• You stay in control: The existing management team remains in control of the day-to-day running of the business.
• Flexibility: A CVA is a contract between the company and its creditors. Every CVA proposal will be different depending on the specific circumstances, but each will enable a restructure to allow a return to profitability.
• Creditor action is frozen: Once a CVA is approved it is binding on all creditors affected by the CVA and provides protection from creditor pressure and legal action, including winding-up petitions.
• A fresh start: It allows the company to move forward without the burden of all of its historic liabilities, enabling a successful turnaround.

Our team works alongside management to prepare the projections and proposals, and we continue to be available to support you throughout the CVA to ensure the turnaround can be effectively completed.

Restructuring Plan

A restructuring plan under Part 26A of the Companies Act 2006 enables financially distressed companies to renegotiate debts with creditors and shareholders, offering a court-approved mechanism to avoid formal insolvency. If approved, the plan can bind all parties, including those who vote against it.

This restructuring tool is particularly useful for large or complex companies with multiple layers of debt or different classes of shareholders; however, in the right circumstances, it can also be a highly effective tool for smaller companies.

Administration

Company Administration is one of the most powerful and high-profile corporate insolvency procedures. A licensed Insolvency Practitioner is appointed as Administrator and takes control of the company. Their primary objective is to rescue the company as a going concern, or, if that is not possible, to achieve a better result for creditors than if the company were simply wound up.

When is administration suitable?

Administration is often used to:

• Quickly protect a business from aggressive creditor action to allow time for a rescue plan to be implemented.
• Facilitate a sale of the business and its assets as a going concern, preserving jobs and value.
• Undertake a controlled wind-down of the business where a sale is not possible.

Key strategies in administration:

• Trading in administration: The Administrator may continue to trade the business for a period while they seek a buyer or implement a restructuring plan.
• "Pre-pack" administration: This is where a sale of the business and assets is arranged before the company officially enters Administration and is completed immediately upon the Administrator's appointment. This can be a highly effective way to ensure a seamless transition and preserve the maximum value in the business.

Our team has the expertise to work with you and your key stakeholders to determine the most appropriate strategy before implementing it swiftly and professionally following an appointment.

Discuss CVA & Administration Options

Knowing which path to take can be difficult. If your business is facing financial pressure but you believe it has a viable future, it is vital to seek professional advice early. Contact our licensed insolvency practitioners today for a free, no-obligation, and completely confidential discussion.