Thanks to CVAs, large bad debts need not mean the end of the road
Robin had managed for many years a family construction company that undertook subcontract work for a number of larger national construction companies. He was heavily involved with one on a major project when receivers were appointed and it became clear that he would not be paid for his work for a long time, if at all. However, his suppliers and staff all wanted their money. His bank manager was sympathetic but unable to help and suggested that he speaks to us.
We quickly evaluated the company's financial position and future cash needs. It was clear that there was no way that Robin could find the ?250,000 needed from within the company to clear the pressing bills and the family could not raise it elsewhere. On the other hand, it was also clear that if the business ceased trading, the usual discounts would have applied to his other on-going projects and unsecured creditors would have received nothing. Indeed, it was likely that the bank manager would be chasing Robin under a personal guarantee for a bank shortfall.
We therefore proposed a CVA based upon Robin putting in the ?50,000 he could raise from his family and suppliers accepting 50% of their debts, payable over twelve months. This was affordable and made good the loss from the bad debt. The company successfully came out of the CVA after that time.
"A significant bad debt might not be the end of the road. Think about sharing the pain with a CVA"
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