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This case study details the actual
circumstances of an "old style" (1986 Insolvency Act) Company
Voluntary Arrangement (CVA) completed by Purnells to a satisfactory
conclusion.
We were approached by a media relations
company operating on a National basis who wished to not renege
on their liabilities to creditors. The director had the option
of closing down their existing company and having a re-start
business. Since the business was a "people business" the value
of the operation was not represented by physical assets but
instead by the knowledge in the minds of the directors.
To maintain credibility the directors
chose not to go down the phoenix company route but instead
proposed an old style CVA. Under that proposal the company
paid monthly sums over a three-year period. At the conclusion
of the CVA the creditors received a material dividend.
There were three very great advantages
to the directors
- Firstly they improved their credibility by taking a step
which was more expensive for them (but which gave them three
years credit from their creditors).
- Secondly because the CVA was one under the 1986 Insolvency
Act there was no advertising of the CVA's existence - consequently
the fact of the CVA remains to this day unknown to many
in the business community.
- Thirdly because the creditors received much more than
they would have had the company been placed into liquidation
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