A robust restructuring plan will typically consider all options available to a business. The combination of plan elements, which may include rescue, recovery and insolvency options is what we call Contingency Planning.
Directors can face criticism and even sanction if they have been shown to pursue ‘blue sky’ recovery scenarios that had no realistic probability of success and that in doing so they worsened the positions of creditors. An uncontrolled insolvency event, i.e. one without appropriate planning involving a qualified Insolvency Practitioner may have the potential to materially erode asset value and thus the outcome from creditors.
Directors can help fulfil their statutory obligations by engaging early with an Insolvency Practitioner who can form a practical contingency plan for an insolvency event. We can work discreetly with senior management, lenders and other key stakeholders to develop granular contingency plans which can be rapidly executed with minimal disruption should a situation deteriorate. That plan can be held safe as the last contingency option.
CVAs are a contract between a corporate entity and its creditors to compromise present and future liabilities in a stressed or distressed situation where no solvent solution is available. It is a form of business insolvency and must be overseen by a qualified insolvency practitioner. It must be demonstrated that the alternatives, e.g. administration, would deliver less value to creditors.
CVAs are most useful for entities with a viable underlying business but which need to compromise only some of its liabilities (e.g. long-term property or other asset leases) or where a business is seeking to write off debts in a tax-efficient manner. In recent years, most of the high-profile CVAs in the market place have been put forward by operators in the following sectors:
When you approach KPMG, we will take the time to assess the current position of your company and decide whether a CVA is appropriate. When considering this route, it is important to be able to demonstrate that other insolvency options would deliver less value to creditors. In order for this solution to be approved, creditors accounting for 75% or more of a company’s total debt value would need to agree to the CVA. KPMG has employees all over the UK who are qualified to support companies who believe this may be an option for them.
In the UK, we have over 30 licensed Insolvency Practitioners spanning the length and breadth of the country, and we take more formal insolvency appointments than any other Big 4 firm*. The appropriateness of any potential insolvency process will depend entirely upon the circumstances of each case and the stakeholder positions involved. Some of the processes we handle are outlined below:
KPMG Restructuring has recently supported the industry consultation into the most significant changes to insolvency legislation in almost 20 years, which came into effect on 26 June 2020.
The Corporate Insolvency and Governance Act 2020 (“the Act”) introduces major new measures aimed at reinforcing the rescue culture during this period of economic uncertainty. These changes will provide crucial support to the country’s economic recovery.
Read more about this here:
* Based on figures compiled from the London Gazette covering Administrations and Administrative Receivership appointments in the 5 years to 31 December 2019, KPMG took a total of 233 insolvency appointments. This compares to an aggregate combined total of appointments for PwC, EY and Deloitte in the same period of 231. These figures have been "de-grouped" so that only one company in a group insolvency is counted. Refer to: https://www.thegazette.co.uk/insolvency
Our dedicated Corporate Simplification team specialises in Members’ Voluntary Liquidation (MVL), Legal Entity Rationalisation (LER), and Pre-elimination Restructuring. The team, made up of experienced professionals and licensed insolvency practitioners, works alongside our global network of Restructuring specialists and associated subject matter experts, enabling us to provide a tailored and fully integrated service.
MVL is a statutory process available to solvent companies that leads to dissolution. We provide experienced licensed Insolvency Practitioners to act as liquidators.
We help clients to simplify their corporate structures by delivering tailored LER programmes, typically focussing on, or culminating in, the elimination of entities.