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Rise in Voluntary Arrangements

23/08/2010

Statistics released earlier this month show the number of companies entering into Company Voluntary Arrangements (CVAs), almost doubled in the past twelve months.

Liquidations have remained steady, with 1 in 127 companies entering into liquidation in the last twelve months. Administrations have fallen by almost a quarter.

Paul Hatton, , solicitor at KBL Solicitors comments “The threat of insolvency has increased significantly since the recession. Creditors need to be extremely careful about their credit control. Extending too much credit to customers or taking too long to pursue outstanding invoices, puts the creditor at the risk of receiving nothing if the debtor enters into liquidation.”

“As well as acting for creditors, we are increasingly advising a number of distressed companies who are under pressure from banks and trade creditors. In those circumstances, we work closely with the company’s accountants and insolvency practitioners to help achieve the best commercial solution. A CVA can give the company the opportunity to trade out of the insolvency, with the creditors receiving payment towards the debts during the life of the arrangement.”

Paul adds “We also advise directors of distressed companies, who are concerned about their personal liabilities. The latest statistics show that in the past twelve months, the number of Individual Voluntary Arrangements (IVA’s) entered into increased by 10.2% whereas the number of bankruptcies fell 20.6%. In the second quarter of 2010, the number of IVA’s applied for averaged 140 per day. I anticipate that many of the IVA’s are a result of banks and creditors calling in personal guarantees.”

If your business needs help pursuing debtors or needs help to survive, you need to take advice as early as possible. Please call us on 01204 527777.