Business IVA explained

Many businesses from time to time come into troubled waters this could be for various reasons. However the directors or individuals may have to overcome these difficulties which are putting a strain on resources.

It is possible to re-structure company debt and reduce company expenditure however this is not always the case. The company bankers might restrict further lending putting further pressure on the company itself.

When in this position many obstacles may be put in ones way and the directors or the individual feels there is no way forward. The bankers may seek securities from the individuals as a way forward however before entering into any agreement one should seek advice and what other solutions may be available.

There is a similarity with a Business IVA to an Individual IVA in that there is a possibility of presenting a proposal to the creditors and bankers in the expectancy of continuing trading.

It may be that debts owed to the company or the individual can be used as a security within any proposal.

Any proposal that is placed before creditors for consideration must be coherent in that it demonstrates that the company or individual can service the proposal presented.

An Insolvency Practitioner (I.P.) would be able to assist in the presentation in that he could draw all the financial issues together, he may opt for an outside opinion as to the onward viability of the company before taking matters forward.

The on going viability of any company is paramount to the basis of any agreement otherwise it would not be possible to present a proposal to creditors.

A Business IVA is not unlike an individual IVA in that it is based on incomes and expenditure (Profitability) however it extends further to the customer base and beyond thus the necessity to demonstrate viability should it continue, we call this a Business Rescue Package.

Any proposal is subject too 75% approval by the companies creditors, should approval take place then a supervisor will oversee the running of the company or the individual.

It is possible that a proposal could be rejected however supplemented with an administration arrangement which the details would be set out.

There are many issues that could arise in the preparation of any proposal of a business IVA and therefore all options should be explored before entering in to any agreement PLEASE NOTE that any agreement entered into is binding on all parties.

It is not un-common for guarantees to be sought from Directors or Individuals to allow the company or individuals to continue trading and which would form part of any agreement reached.

If such guarantees were such fourth coming then it may assist and sustain the ongoing business (under supervision).

It is most important that legal advice is taken before any action and out before any proposal is put before creditors for consideration and is considered by the debtors solicitors prior to signing any agreement as this agreement would be legally binding and could have severe repercussions should the ongoing business fail.

There are a number of questions one might want to ask and consider before taking the IVA route:

• Do I need IVA advice?
• Do I qualify for an IVA?
• Is an IVA right for me?

These are three vital questions that might only be answered once you have considered a number of questions.

Question:
Will an IVA be of benefit?

• An IVA becomes beneficial as a result of the 1986 Insolvency Act.

Question:
Will an IVA stop the company banking facility?

• A restriction on borrowing will be imposed unless authorised by the I.P

Question:
Will an IVA become public knowledge?

• Any IVA agreement is between the creditors and the debtors and is not put into the public domain.

Question:
What voting is required for an IVA to be accepted?

• An IVA acceptance will depend upon 75% of the voting creditors.

Question:
Will an IVA have any restriction on trading?

• Any IVA proposal should not impinge the trading of the business

Question:
Will an IVA require any security?

• Any IVA proposal may require personal guarantees.

Question:
Who pays the I.P. (Insolvency Practitioner) overseeing the IVA?

• I.P. (Insolvency Practitioner) fees are paid from within the realisations of monies within the managed IVA.

Question:
Will there be any upfront fees on an IVA application?

• The I.P. (Insolvency Practitioner) will not request any upfront fees.

Question:
What will be the result if the IVA proposal is rejected?

• If an IVA proposal is declined by the creditors then there is still an option of administration or bankruptcy itself. One other option open is an Informal Arrangement with creditors.

Question:
Will an IVA affect our credit rating?

• The company or individual credit rating will be affected in that an individual will be restricted in the usage of credit cards and further borrowing. The company on the other hand would work on the authority of the I.P. (Insolvency Practitioner).

Note of caution: A draft IVA proposal should be sought to allow the debtors solicitor the opportunity of raising any issues within that might jeopardise his / her clients.

Note of caution: Finally an IVA proposal once agreed is a binding document on all parties and serious repercussions could fall should the business fail.

At this point once you have considered the above you should be in a position to ask the main important question: Do I Need IVA Advice?