Figures published today by the Insolvency Service show that the number of company voluntary arrangements “CVA” approved in England and Wales in the 1st quarter of 2018 were (102) and 129% of the number approved in 1st quarter of 2017 (79).
The CVA numbers of 102 include some very large high street chains including:-
Byron Burger Chain
The CVA approved in January 2018 approved a plan to close 20 of its 67 restaurants. Byron had struggled with soaring labour costs, business rates as well as food and rent inflation.
CVA approved in March 2018 permitted the closure of 60 out of 593 stores and effect 980 redundancies. The CVA is to last 3 years. Alistair George, Executive Chairman of New Look commented on the website “Given our challenged trading performance and over-rented UK store estate, we are having to take tough but necessary actions to reduce our fixed cost base and restore long-term profitability”.
The chain which includes Prezzo, Chimichanga, Café’ Uno, Cleaver and Mexico brands proposes via an approved CVA to close more than 90 restaurants with around 500 staff potentially effect. The plan is to reshape the business concentrating on a smaller profitable core of restaurants.
The trend is continuing with High Street Fashion Chain Select gaining approval of its CVA in April which is not proposing store closures but rather a reduction in rents with a rent free period and only a proportion of rents owed being paid.
CVA’s remain the least used procedure to deal with company insolvencies.
Creditors Voluntary Liquidation “CVL” are also on the increase with 3,209 in the 1st quarter, up by 516 on the same quarter of 2017. Included in these numbers were 475 bulk insolvencies – the liquidation of personal service companies.
The process for winding up companies underwent changes in 2017 with new “Decision Procedures” introduced. Physical meetings of creditors have been replaced with either virtual meetings or creditors voting a simple yes or no to the procedure “Deemed Consent”. Creditors who represent 10% of the value or number of creditors can insist of a physical meeting.
The number of IVA’s approved high an all time high in 1st quarter of 2018 – 16,676. IVA’s have been steadily increasing with 59,559 IVA’s approved in 2017, 11,000 higher than the numbers approved in 2009.
The increases started in 2014 which coincided with Debt Management companies requiring FCA approval. The approval process was very tough for the Debt Management industry with numbers declining from hundreds to less than 20. Another factor influencing the increase in the numbers of IVA’s are the increase in “IVA packagers” who are referring cases to large IVA providers for a fee which is generally paid within days of the case being passed through. There are concerns about the customers’ journey into IVA’s via these packagers. Proposing an IVA needs careful consideration and advice must be provided on alternatives including Debt Relief Orders, debt management plans, bankruptcy or dealing with creditors direct. Many of these packagers are Appointed Representatives “AR’s” of companies directly authorised by the FCA to provide debt counselling. There have been calls by many sectors including the free to client sector for the FCA to turn their attention to these “AR’s” to eradicate poor high pressure selling.
If you are struggling with serious levels of debt, it really is vital you get advice from debt solution providers that are authorised and regulated by the Financial Conduct Authority. Even better check that the practice can offer both debt counselling and debt adjusting which means they can offer advice on all options and implement both IVA’s and debt management plans.
Bev concluded: “As an industry we have worked hard to get non-lending solutions fit for purpose. We now have protocol compliant IVA’s and debt management plans which should provide consumers with real choices to deal with their debts.”
“Whether seeking advice from the fee-charging or the free debt advice sector, the main thing is to not bury your head, seek out that advice and take your first steps to realising a life free from the stress of serious debt.”
There are lots more useful hints and tips for dealing with life and debt at www.thedebtadvisor.co.uk or contact 0800 0851 825.
Bev Budsworth, MD at The Debt Advisor Ltd which incorporates The Business Debt Advisor
Bev Budsworth is authorised to act as an insolvency practitioner by the Insolvency Practitioners Association offering skilled and specialist advice on personal debt.
The business was first established in 1999 and works closely with both individuals and businesses struggling with problem debts to find solutions, which can protect assets from creditors, freeze interest and charges to repay debt in five years or less. Our websites, The Debt Advisor and The Business Debt Advisor provide information and case studies on uses of the different procedures.