CVAs account for only a small fraction of the corporate insolvency market. This is because they often aren’t the most suitable restructuring tool.
When you are putting together CVA proposals, you must be sure to work with an insolvency practice that has taken the time to understand your business and to draft appropriate and flexible terms.
A CVA can be an excellent restructuring tool, but there are a few key questions we always look to answer when deciding suitability:
1. Is there a standout reason for the current cashflow difficulties?
2. Is there strong management in place?
3. Does the business have a clear and realistic plan moving forward?
4. Does the plan correlate with the historical figures?
5. How does the business compare against industry averages?
6. How far back does the HMRC debt stretch?
7. Are key creditors supportive?
8. Are funders supportive?
As a professional firm, we will only put forward a CVA proposal where we believe it has a fair chance of success. It is estimated that 40% of CVAs fail, so it is important when considering a CVA to understand the alternatives prior to doing so.