Turn Insolvencies into Opportunities (well some of them)

I had this the other day.  One of my client’s confirmed that he had a pile of paperwork in the corner, which suggested that there was not a lot they knew what to do with it.

In a statement it was “Company gone bust – not a lot to do with it – lets just write the debt off?”

But what if, there was another way around this.

The following is a basic guide to be aware off, in turns of turning Insolvencies into Opportunities.

Apart from the Liquidations and Receiverships’s which we may as well just write the debt off, the two other important elements to consider if time allows you, or pass this out to an Expert who can negotiate the correct deal for you, is exactly this – there might be something within Administrations, and CVA’s which might enable your company to consider doing business in the future.

Why, am I being absurd??  And why am I telling you this (considering that I assist Companies manage the recovery of bad debt and also with Cashflow.)

hmv closing

Ok, let’s paint a picture for a feeder company, supplying the likes of HMV, before it went bust, owing them in the region of £156,000.  That alone, left a massive dent in its cashflow.

As a result, that company wasn’t able to pay its suppliers, and quickly had to take insolvency advice, resulting in the company entering into a CVA (Company Voluntary Arrangement).

CVA (Company Voluntary Arrangement)

Generally from a Creditors point of view this can be perceived as high risk.  Some write this debt off, and hope for the best, whereas others just do not offer them any credit facilities at all.  And why should they, but what exactly is a CVA?

Its an arrangement which is fixed for a predetermined period of time, usually five years.  In it, the Supervisor (usually an authorised Insolvency Practitioner) would look at the income and expenses of a company and over that given period, issue a dividend payment which would be worthwhile for Creditors.  Usually, and very successfully in some cases it can do so where there is a threat of a Winding Up Procedure looming by a Creditor, owed a significant amount of money.

But, in testament to those Creditors, it is worthwhile noting, that if you maintain a good relationship with them, then they are likely to continue trading with you on a cash only basis.

Other benefits offered are that they continue trading as a going concern, and that all debts to creditors are fixed, and it is a better outcome than say that of an Administration and/or Liquidation.  The disadvantage of this is that if the payments to the Supervisor are not kept up to date, then it unobtrusively it can cause the company to fall into Liquidation, therefore rendering the entire arrangement null and void.


On the flip side, there is insolvency arrangement of an Administration, whereby a said company goes into this, with a pre-pack already in motion or in play before the current company is placed into this arena.  Then, by way of a pre-formal arrangement the Directors buy all the goodwill and the assets needed to continue running a brand new company.

It doesn’t always need to end in bad terms, and provided that you have a good and clear understanding with your Customer from the outset, then you may be better placed to enter into a Novation of any contract that you may have with them.  Usually, the old company is done away, and the new company transfers over, meaning there is little or no risk to you.



If you would like any further information, or need to discuss further, then please do not hesitate to contact the Writer of this Article.





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