The zombie companies who lurch from month to month, barely able to cover their interest payments, wages, creditors and tax liabilities. They can’t reduce their debt or invest for the future. They tie up valuable capital and pose a serious threat to our economic recovery.
There is hope though. Where there is an underlying profitable business, it may be possible to restructure for a healthy future. If consulted at an early enough stage, Insolvency Practitioners view a Company Voluntary Arrangement (CVA) as a viable option for bringing some zombie companies back to life.
In a CVA, the directors remain in control of the company. They will often have to review their entire business strategy and accept that any deep and radical restructuring can only be achieved through making some tough decisions.
The CVA can:
- help maintian cash flow;
- allow for rebuilding profits;
- enable the winding up of onerous contracts;
- agree extended terms for repayment of historical debts or provide a moratorium for small companies; and
- provide protection from pressing creditors for 28 days, allowing creditor terms to be agreed.
Directors will need significant effort, dedication and commitment to make a CVA work, but it can be a route to continuing viability and better financial health.
Thomson Cooper Zombie Hunter, Partner and Insolvency Practitioner Richard Gardiner can discuss the options. Call him on 01383 628800.