INSOLVENCY SERVICESINSOLVENCY SERVICES

Procedures

Mandate of Ad Hoc Advisory procedure

As trustee nominated by the debtors' company and confirmed by the President of the Law Court, B&P will perform in within 90 days of the designation an understanding between debtor's creditors, thus financial problems to be solved, claims paid, the company saved from bankruptcy and jobs preserved.
In order to accomplish this, B&P will do:

  • propose deletions debt;
  • propose debt rescheduling;
  • proposed partial reduction of debt;
  • analise and propose continuation or termination of ongoing contracts;
  • propose staff reductions, and of any other measures deemed necessary.

CVA (Company Voluntary Arrangements) procedure

Companies in difficulty can call also CVA - Company Voluntary Arrangements - which is a more complex procedure than Term ad-hoc procedure and can takes a longer period of time, respectively 18 months.

A CVA is a recognised legal procedure under the Law no.381/2009 that enables a company to enter into a binding agreement with its creditors detailing how the company's debts and liabilities will be dealt with.

The obvious benefit of a CVA is that a viable company in financial difficulties (often with historical cash flow problems) can be rescued from liquidation; with company restructuring enabling the repayment of creditors, either in part or in full over a period of time.

CVA is a mechanism for a viable company to come to a legally binding agreement with its creditors in satisfaction of its debts. The overall policy objective behind CVAs is to ensure the continuation of the company as a going concern wherever possible.

Who Can Benefit From A Company Voluntary Arrangement (CVA)

  • Businesses that have experienced trading difficulties since start up and need time to prove their business model;
  • Businesses that want to avoid the stigma of liquidation;
  • Businesses that know they can be profitable and successful in the future but need a bit of time;
  • Businesses that have close ties with their suppliers and do not want to see them lose what they are owed;
  • Business that need some time to put together a new business plan for the company;
  • Businesses that will be profitable in the short term but are under pressure from creditors;
  • Businesses that are profitable but have experienced bad debts or late payers this affecting the short term health of the company;
  • Businesses that need to restructure;
  • Businesses that have a good business model with a full order book redundancy but do not have the cash flow problems;
  • Companies that wish to wind down trading in an orderly fashion;
  • Companies that wish to close down over a certain time.

Through B&P legal and financial advice, a company in difficulty can request a Company Voluntary Arrangement, a complex procedure that brings many benefits as:

  • The existing management can stay in place under these arrangements and the company can continue trading;
  • Company voluntary arrangements (CVA's) can improve cashflow, quickly;
  • Stop pressure from tax and VAT while the CVA is prepared;
  • A company voluntary arrangement can quickly cut costs;
  • Company voluntary arrangements can terminate employment contracts, leases, onerous supply contracts;
  • Finally, it is also a good deal for creditors as they retain a customer and receive their debts.

CVA procedure it's a deal between the insolvent company and its creditors; this deal protects the company and stops creditors attacking it. It allows a viable but struggling company to repay some, or all, of its historic debts out of future profits, over a period of time to be agreed.

Basic Steps of the Procedure:

  • The CVA can be proposed by a company in difficulty;
  • The procedure is administered by a Licensed Insolvency Practitioner;
  • A study of the company and its position in the marketplace in made;
  • Directors & secured creditors debate the proposal;
  • After the proposals are complete, B&P, legally named by the company and confirmed by the insolvency judge as Conciliator, needs to prepare a report on the proposals which includes comment on the due diligence we have undertaken to ensure that the CVA proposals are accurate, reasonable and achievable;
  • CVA should include, among others, the situation has assets of debtor liabilities, certified by a chartered accountant or a certified auditor of the project and an estimation of accounts on the following 6 months;
  • A recovery plan is made that entitles conciliator to foresee restructure management of the company, change of structure or reduce staff. CVA may include measures such as social capital increse or reduce, cancelling area of branches or points so, wholesale assets or provision of guarantees;
  • Once filed at court, the CVA proposal is sent to the creditors;
  • A meeting is called with all creditors (or agents of creditors) at which the creditors vote on the proposal;
  • Creditors may request modification of the proposal, which will need to be approved by vote;
  • Once approved, all creditors are legally bound by the proposal;
  • After approval, the CVA has to be validated by the insolvency judge;
  • During preventive arrangement approved procedure, the insolvency procedure can not be open against the debtor.