Restructuring with a CVA or administration

Pre-pack administrations and company voluntary arrangements (CVAs) offer directors and business owners useful restructuring options

Post lockdown, many directors will restructure their companies using insolvency procedures, most likely administration or a company voluntary arrangement (CVA).

The Government recently introduced a moratorium facility, which offers 20 to 40 days of protection from creditors. But a director who opts for this will undoubtedly find themselves considering a CVA or administration once the moratorium ends.

Why? Because depending on what you’re trying to achieve, administration and a CVA both offer excellent possibilities for restructuring.

A CVA is great if you’re going to continue trading and moving the business forward with the support of creditors.

However, a pre-pack administration is more appropriate if you’ve lost the support of creditors and want to start again. This is because a pre-pack allows a director to:

  • Cut ties with creditors
  • Buy back the useful parts of the company
  • Start trading again with a clean slate.

CVA vs Administration

With a CVA you’re shedding weight so you can travel lighter and further. You can shave 50% to 60% (or even more) off the value of your debt, and repay the balance over 5 years.

And all this can be done completely interest-free, providing you with an opportunity to be more competitive, lean and profitable.

A major difference between the procedures is that creditors in a pre-pack administration may end up with nothing. Directors can lose the creditors in a pre-pack, and strike a deal with the administrator to buy back the assets.

The administrator may require a personal guarantee, but the director can pay in instalments over many months. Effectively, the assets are transferred from the insolvent company into a new 1.

The new company starts trading immediately under a new name, and the cash generated is used to:

  • Improve the business
  • Pay the administrator for facilitating the pre-pack

Independent support

It’s essential that you seek professional advice before placing a company into any of the aforementioned insolvency procedures.

This support should come from an independent specialist rather than a lawyer or insolvency practitioner (IP). A lawyer is only likely to refer you to an IP who cannot provide independent advice in this situation.

For example, an IP is more likely to recommend a pre-pack administration over a CVA simply because a pre-pack will earn them more fees.

Furthermore, an IP will counsel the director before the company is placed into a procedure. But the IP also has a duty to protect the company’s creditors, which creates conflict of interest issues.

As the old saying goes: ‘No one can serve 2 masters.’ And that’s why it’s crucial you utilise the services of an independent expert to provide advice that’s in your best interest.

the 79th group

A Difficult Truth: The 79th Group’s Latest Statement

17/04/2025

On 10 April, The 79th Group issued a public statement in response to the ongoing investigation by the City of London Police, which can be…

Read More
the 79th group

The Cold Truth About The 79th Group, the Police, and Your Money

11/04/2025

The 79th Group Loan Notes Recovery Over the past several months, a growing number of investors have come forward, alarmed and confused by what’s happening…

Read More

High Street GRP – The Security That Never Was…

08/04/2025

High Street GRP promised investors that their money was safe — secured against valuable real estate. In reality, there was no meaningful security, and over…

Read More
the 79th group

The 79th Group Loan Notes- Troubling Security Trustee Issues

04/04/2025

As The 79th Group suspends redemption and interest payments on its loan notes and ceases to respond to concerned investors, scrutiny is intensifying over the…

Read More