Why administration isn’t always the right business rescue route
April 16, 2021
An IVA is a legally binding agreement between an individual and their creditors. It allows an individual to reorganise their financial affairs and takes away the devastating stress caused by being under sustained financial pressure from the people to whom they owe money.
The Individual Voluntary Arrangement (IVA) procedure was introduced by the Government in 1986 as an alternative to bankruptcy; it allows people take control of their debts and negotiate a deal with their creditors leading eventually to a safe and secure financial future free of debt.
An IVA freezes interest on unsecured debts and allows an individual to agree with their creditors that they will repay either all of their debts or a percentage of them over a number of years.
The debtor must make a full disclosure to the Nominee of all their assets and liabilities. The insolvency legislation requires a debtor to prepare the proposal to their creditors with the help of a licensed insolvency practitioner (IP), who is called their Nominee.
The proposal put to the creditors must show that they will make a better recovery by agreeing to the IVA than if the individual is made bankrupt instead. The proposal is confidential and the debtor remains in control of their assets, but the conduct of the IVA is overseen by an IP, who is known during the process as the Supervisor. This is usually the same IP who acted as the Nominee.
An individual can put proposals for an IVA to their creditors if they have already been declared bankrupt or if they have been presented with a Bankruptcy Petition by a creditor. If the debtor is self-employed and has a viable business, they can continue to trade.
There are no set rules for an IVA, so there is no minimum or maximum payment percentage and no limit to the duration. Whilst certain creditors such as HMRC have accepted norms that they will tolerate, this process is a matter of negotiation and depends entirely on an individual’s personal circumstances.
Opus is committed to giving the best advice to financially stressed individuals and guiding them in formulating a proposal, which meets the required threshold of being fair, fit and reasonable and, crucially is achievable. Getting this difficult balance right is vital for all concerned.
Opus has a number of IPs, who specialise in personal insolvency, so that we are able to carry out the role of Nominee and once appointed as the Supervisor of the Arrangement.
For more information on Individual Voluntary Arrangements, we offer an initial free consultation to review the situation and make recommendations on the best way forward. If we think that an Individual Voluntary Arrangement is the best route forward, our specialists can support the individual at every step of the way through the process.
Contact our Head Office on +44 (0) 20 3326 6454 to arrange a no obligation and confidential call with one of our Partners.
“We approached Steve Parker of Opus when our business, which was in the hospitality sector, began to get into difficulties. Steve was helpful and supportive and gave clear and timely advice regarding our options. Resultantly the company was placed into Administration which was handled by Steve and his team in a fair and very professional manner. As a consequence we were able to emerge with a much slimmed down business which has flourished over a number of years allowing us to build up considerable reserves sufficient to see us through any future period of uncertainty”