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Why Is The Insolvency CVA In Need Of A Rescue?

Once the darling of insolvency procedures for the rescue and restructuring specialist, but now is the insolvency CVA procedure itself in need of a rescue?

Insolvency CVA Procedure Itself In Need Of A Rescue

Company Voluntary Arrangements (“CVAs”) are a threatened species as the future of CVAs as an insolvency rescue procedure looks anything but bright. Yet they are potentially needed now more than ever as a vital piece of kit in the Insolvency Practitioner’s toolbox.

Barely however do they now make it into double figures each month, such is their fall from use. Only ten CVAs made it past the proposal stage in April 2022.

The predictable collapse of CVAs comes at a time when Administrations are flatling and CVLs are hoovering up the market.

CVLs Hoovering Up The Market

Creditors Voluntary Liquidations (“CVL”) have long been the staple diet of many an Insolvency Practitioner and their numbers have been surging forwards over the last twelve months.

In recent times, of the two most common corporate insolvency procedures for companies in financial difficulty, CVLs, leave their rescue cousin, Administrations trailing in its wake. Indeed on average over the last two years for every Administration, there have been a staggering 13 CVLs as Administrations linger far behind.

cvls hoovering up the market

With these numbers, one might wonder how the Pre-Pack (the subject of much concern in recent years) can make a Come-Back. Or as with Company Voluntary Arrangements, whose numbers appear to have been decimated following the return of the Crown Preference in December 2020, will they also edge closer to becoming species extinct?

The anticipated surge in insolvent company cases appears to have started in 2022 following a double whammy – the global Pandemic and the catastrophic effect of the Russian-Ukraine war sparking inflation at levels not seen for forty years.

The increase seems to be concentrated in the CVL market as other procedures Bankruptcy and Compulsory Liquidation seem to be currently showing unremarkable movements.

Concerning it is that the numbers for CVAs in particular and Administrations seem so low because Liquidation is the death of a company.

Insolvency Case Numbers to April 2022

Over the last two years going back to the start of the Pandemic CVLs have more than doubled from 791 in May 2020 to 1,777 in April 2022, whereas Administrations have completely flatlined. The surge in CVLs this year has meant in April 2022 there was a 31% rise in the number of CVLs compared with January this year. That increase represents over 400 more CVLs compared to January 2022.

This suggests an inherent weakness in the UK economy with businesses in trouble seemingly opting to terminate rather than resuscitate.

cvl cases last 2 years
administration cases last 2 years

Indeed Administrations when examined monthly over the last two years, only made it past the one hundred mark less than 50% of the time; dropping to as low as 39 in June 2021.

Rescuing The CVA

Rescue of a company as a going concern was at the heart of the then new out of Court Administration procedure in the Enterprise Act 2002. It was an insolvency procedure that could be used to facilitate a CVA rescue attempt.

Now the CVA market has transformed and it appears in need of a radical shakeup to help the many prospective candidates that may hope to make use of it in the months ahead.

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Disclaimer: Insolvency CVA Procedure Itself In Need Of A Rescue?

This page Insolvency CVA Procedure Itself In Need Of A Rescue? is not legal advice and should not be relied upon as such. This article Insolvency CVA Procedure Itself In Need Of A Rescue? is provided for information purposes only. You can contact us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

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