Initial review
The
first stage of the process is to
establish the viability of the business in the short and medium term to
determine whether a CVA is appropriate.
Alternatives
will be considered at this stage to ensure that appropriate advice is
provided.
The
process can take from 6 to 12 weeks to
obtain approval depending upon the complexity and during this period
the
company must have sufficient cash resources to be able to continue to
trade. Therefore a
short term pre-CVA
cash flow will need to be established to ensure that it will be able to
survive
in the lead up to the CVA.
Preparation
of financial forecasts
A
full set of 3 to 5 year forecasts must be
prepared – a profit and loss account, balance sheet and cash flow,
together
with full details of assumptions used.
An element of sensitivity analysis will need to be
undertaken to test
the impact of potential risks on the viability of the business.
The
outcome of this stage will determine
whether the CVA remains viable and the likely structure of the CVA.
Reorganisation
It
is often necessary to undertake a cost
cutting exercise to reduce the cost base of the business. This may require
redundancies and a certain process
will need to be followed to ensure that the claims such employees have
are paid
by the government and not the company.
Discussions with key
stakeholders
If
the company has external funders it will
be necessary to obtain their ongoing support or find a party that is
willing to
do so. Normally
this is not a problem
provided that the position of the funder is not compromised by the
proposed
CVA.
Other
stakeholders may be critical to the
success of the CVA. This
may include key
suppliers, customers and employees who need to be aware of the impact
of the
CVA.
