South-west based estate and lettings business rescued

Bishop Fleming’s Restructuring Team is delighted to confirm the acceptance and their appointment in respect of a Company Voluntary Arrangement (“CVA”), an insolvency process, for the Devon-based Estate and Lettings Business, which secures its future.

The Devon-based business, with a long trading history of over 50 years and with various branches throughout Devon, has been subject to increased competition from online agents in recent years, which has been exacerbated by a slow-down in transactions throughout 2023 following the Pandemic. 

The increasingly growing conveyancing process, also, which has increased the time it has taken between agreeing and completing on a sale, has created additional working capital pressures for the business, whilst also resulting in more transactions collapsing. 

This financial performance has been reflected in a build-up of debt.

Company Voluntary Arrangement (CVA)

In view of the business’s insolvent position and its inability to discharge its creditors in the ordinary course of trading, a CVA was considered the most appropriate strategy for safeguarding the business. 

A CVA is a formal, legally binding and well-recognised insolvency process, which involves the formulation and issuing of a ‘Proposal’ to a company’s creditors, which governs how and over what period creditors will be discharged moving forward. 

A typical Proposal normally provides that a company will continue to trade and inject regular cash contributions from its future trading profits, which are then appropriated between creditors by the appointed Insolvency Practitioner, whose responsibility it is to supervise the CVA and ensure the company fulfils its obligations. 

A CVA is approved when at least 75% of participating creditors vote favourably. 

A second vote is then taken without ‘connected’ creditor participation, and as long as 50% or more vote for acceptance of the CVA, it will be passed. 

Once approved, all unsecured creditors are bound by the terms of the CVA, irrespective of whether and how they voted.

Securing the ongoing running of the business

The general premise of a CVA is that it facilitates the ongoing running of a business by its incumbent management team, whilst also maximising the return to creditors.  

A proportion of future trading profits are paid into the CVA for distribution to creditors in full and final settlement, which would otherwise not be available in a ‘close-down’ scenario.

By comparison, a liquidation involves a cessation of trade and eventually dissolution, and thus the return to creditors is normally reduced.

Malcolm Rhodes, a Licensed Insolvency Practitioner at Bishop Fleming LLP and the jointly-appointed Supervisor, together with Luke Venner, a Partner in the Restructuring Team, commented:

“the business, like many others in the industry, has been impacted by a multitude of external factors in recent years, and without significant restructuring it may not have survived. We are delighted that creditors have chosen to support the company’s proposals and plans and ultimately secure the preservation of what is a well-regarded and reputable local business with a rich and long trading history. 

The CVA will also ensure that all customers can continue to be served by the business. We look forward to working with the creditors and the company in order to implement its Proposal over the coming years”

Contact us

If you would like to discuss our restructuring and insolvency services, please contact a member of our Restructuring Team for a conversation.