Trade Creditors Deserve a Voice in Insolvencies
Businesses fail during recessions. That’s inevitable. But creditors deserve protection from firms that walk away from debts and immediately restart. There are now two alternatives to a conventional winding up — the creditors’ voluntary arrangement or CVA and the pre-packed administration. Both allow unprofitable parts of the business to close with the owners continuing to trade, but while suppliers must approve a CVA, they may not hear of a pre-pack until it is completed and their money is lost. The Barratts shoes and Focus DIY businesses illustrate the difference. Both faced expensive property costs, especially on outlets no longer wanted. Both are still operating but the shoe retailer went into pre-pack administration while the DIY group is implementing a CVA…
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