One option instead of filing for bankruptcy is a CVA. CVA is a Company Voluntary Arrangement; actually it is something like an IVA, but for companies. A CVA is a legally binding document between the creditors and debtor, which settles the details of the debt reduction. The process and approval is similar to the IVA, so that 75 % of the creditors have to agree on the terms in order for the CVA to become valid, you need to hire an Insolvency Practitioner who will do all the work for you. Of course, you will have to give him the necessary details on the exact amount of your debts, all your creditors and so one.

When you first meet with him, he will tell you exactly what documentation he needs. You can benefit from a CVA if your company wants to avoid the stigma of liquidation, if you just know that your business will be successful in time, if your business needs to be restructured, but you must be able to make a meaningful offer to your creditors.

Let us now talk about the benefits of a CVA. First of all, your debts will be reduced to an affordable amount; your company will avoid insolvency. Since a CVA is a legally binding document, your creditors won’t contact you anymore, you will keep in touch with them through your Insolvency Practitioner. Also, your creditors won’t be allowed to take any legal actions against you and your business until you pay the agreed amount in time. It also gives you time to reorganize your company, if you consider that such reorganization needed. One of the great advantages is that your company will not have any negative publicity, because a CVA is a private matter so your company’s name will not appear in the newspapers, like in the case of insolvency.

Another option for your business is a PVA, a Partnership Voluntary Arrangement. This will apply, if you run a business, which is a partnership. A PVA is a formal insolvency procedure enabling a partnership to make a proposal to its creditors regarding the payments of their debts. The partners of the firm must propose the PVA, it comes naturally that they all have to agree on it. Just like in the case of CVA, an Insolvency Practitioner will act in behalf of the partners. He will notify all the creditors and will hold a meeting where creditors will decide if they agree on the terms proposed. If 75% of the creditors agree, than the PVA is accepted. The main benefit of a PVA is that the creditors will be unable to pursue the partners’ individual estates for payment. Another benefit is that the partnership will continue trading, so it will generate an income during the PVA. PVA has a disadvantage too, you should be aware of it: in case of the PVA there is no interim order, so the partnership may be forced to consider an administration order to obtain protection from their creditors. The disadvantage is that it is quite costly to obtain such an administration order.

Another option is administration. This is a way to protect companies from their creditors while they complete a restructuring plan. An administrator is appointed by court, usually an Insolvency Practitioner. Just like in the case of CVA and PVA, he will notify all the creditors and will hold a creditors meeting where they will discuss on the Administration proposal. If the creditors do not accept the proposal, it might be modified, but it still can be rejected by creditors. If the Administration proposal will be rejected, the administrator has to report to court for further directions, and he is also required to send a report to the court on the final outcome of the meeting. If the proposal is accepted, the administrator may appoint directors, managers to run the company. There are a few main objectives of administration: of course, to rescue the company, the administration can achieve a better result for the creditors. All in all, you will find that administration is a good alternative to bankruptcy.

There are two other alternatives you can take into account. The first is receivership. Receivership might be defined as a form of bankruptcy in which your company can avoid liquidation by reorganizing. Reorganizing is done with the help of a court-appointed trustee; in this case too, the trustee is usually an Insolvency Practitioner. You might want to try to get an informal arrangement, if none of the above alternatives satisfied you. Note that in this case you will have to talk to your creditors and explain them how and why you ended up in this situation. Also note that an informal arrangement has no legal standing, and a creditor can ignore it if he is not satisfied with your offer. Besides the mentioned disadvantages, it also has some advantages: it is free to set up, it can work for long or short term, and it is flexible, so if your business recovers, you might change the terms of the agreement.

You could see that you should not be alarmed if your company is in debt, there are many other solutions than declaring bankruptcy. You can save your company and pay up your debts in the same time. You have quite a few alternatives, so you can choose as you like, but do not forget that all of them are legally binding documents, except the last one, the informal arrangement. After you have signed a document, try to keep up your payments, otherwise the arrangements will fail, and creditors will be allowed to take legal action against your company. And you really do not want that, especially when your goal is to save your company. The most important thing before you start any action to save your company is to inform yourself, so you will get the best possible deal for you and your business.

It is not the end of the world if your company has debts; you can easily pay up your debts using one of the above mentioned business debt management alternatives. Good luck!