Company survival plans flop
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• Government-supported measures designed to pull companies back from the brink of bquidation are rarely effective, according to figures released last week by business data provider ICC.
The new data shows that 63% of the companies in Company Voluntary Arrangements (CVAs) failed to solve their financial crises and went bust regardless.
The ICC report comes as Trade and Industry Secretary Stephen Byers is circulating a draft bill which will impose a 28day delay on action by creditors while struggling companies attempt to put together rescue plans or CVAs, ICC managing director Alistair Pauline warns that the changes envisaged by the Government "will do nothing to make the CVA more successful—in fact they may increase its misuse. Pauline warns that the proposal would make it easier for companies "for whom a CVA is not appropriate to get creditor agreement.
A CVA can involve delayed or reduced payments of debt, capital restructuring or an orderly disposal of assets.
The arrangement has to be proposed to creditors and shareholders at separate meetings with limited involvement by the courts.
Every CVA must also be supervised by a licensed insolvency practitioner.