The Insolvency Service released their latest set of corporate insolvency statistics earlier this week for June.
You can read our analysis of them here and while we’re waiting for them to be finessed before releasing the final figures for Q2 2023 – we noticed something interesting happening with company voluntary arrangements (CVAs).
Company Voluntary Arrangements (2020 to Q2 2023)
|Q1 & Q2 2020
|Q3 & Q4 2020
|Q1 & Q2 2021
|Q3 & Q4 2021
|Q1 & Q2 2022
|Q3 & Q4 2022
|Q1 & Q2 2023
Looking at figures from the past few years, CVAs have fallen by over 50% from their 2020 total in 2021 and 2022 but in the first two quarters* of 2023 alone there have been nearly (86%) as many in six months as there have been in those previous two years.
By historical standards (pre-2020) CVAs have reduced but they are definitely seeing a resurgence. For eight consecutive months they have been in double figures with the total of 31 from May being the highest individual monthly figure seen for over two years.
Why consider a CVA?
It’s probably a good time to remind you how a company’s voluntary arrangement can benefit a business that is having difficulties balancing its repayments.
It’s a formal agreement between a business and its creditors that – in return for a proportion of the existing debts being written off – will see the remainder paid off through a regular monthly payment until completion.
Why else is it advantageous for a business to pursue a CVA?
- The company continues trading – this saves jobs in the business and potentially in suppliers and customers too and allows business as usual to continue as far as practicable
- Directors have some leeway to negotiate with creditors on the details of the repayment plan so it can be reasonable and realistic in terms of what they can afford
- Liquidation and administration can be immediately avoided – the CVA gives a business a fighting chance to return to financial viability. If external factors do stop a company from returning to profit then other insolvency options can be considered
- Company directors retain control of the business at all times so they can continue to implement their own decisions so long as they continue to make repayments.
Chris Horner, insolvency director with BusinessRescueExpert, said: “A CVA can be a valuable tool for businesses in debt but there are benefits and potential drawbacks that have to be considered before making any fundamental decision on their future direction.
“Getting impartial professional advice is always the best first step for any director but the immediate considerations they need to bear in mind are the company’s financial position and realistic future prospects and expectations, the level of support that can be expected from creditors and the cost of the CVA.
“The company has to pay the fees for the CVA to be set up and administered which is just one factor in their calculations.”
“But this is just one question that can be answered in a conversation with an experienced and knowledgeable insolvency professional.”
We offer a free initial consultation for any business owner or director who wants to discuss how they can improve their business and make the most of their flexibility while they have the opportunity to do so.
A CVA might be the perfect solution to pressing problems for them, alternatively another process might be a better fit altogether depending on the circumstances.
After they’ve arranged a meeting at a convenient time and date then they’ll have a better idea about what other options they’ll have – but only after they take that first step and get in touch.