ABI urges extension of Company Voluntary Arrangements
The Association of British Insurers (ABI) would like to see large companies able to use Company Voluntary Arrangements (CVAs) as a means of avoiding insolvency, the Independent has reported.
CVAs give businesses an opportunity to reach agreement with their creditors while the directors of the company remain in post.
However, they are currently only used by smaller firms and according to the newspaper, the ABI has written to the Insolvency Service suggesting an extension of the practice.
Such a move could reduce the number of pre-pack administrations taking place.
A pre-pack allows an insolvent company to continue trading while some of its assets are sold to meet secured debts, such as bank loans.
However, the ABI is unhappy about the process as it has allowed businesses to be sold on their original management once the debts have been wiped out.
In August, the body called for improvement in the transparency of the system, which it believes leaves unsecured creditors out in the cold.
The Association also demanded a ban on the same insolvency practitioner acting as adviser to a distressed company both before and immediately after a pre-pack administration.
Category: Business Insurance News, Insurance News
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