For anyone self-employed – whether as a sole trader or the Director of a limited company – mounting debts are certainly no laughing matter and can often cause both stress and embarrassment; particularly for those in the public domain and/or with a professional to maintain.
Prior to IVA’s being made available under a provision of the Insolvency Act 1986, bankruptcy was the only formal solution of dealing with debts, albeit at substantial cost to the person or business involved. Unfortunately, it remains a fact that certain professions can be massively affected by bankruptcy since it can often be seen as a breach of professional codes, thus resulting in sanctions being imposed by professional bodies – even to the extent of people no longer being able to practice in certain professions, such as the police force, armed services, accountancy, law and so on.
So, how can an IVA help?
Well, the key advantage of an IVA is that it doesn’t have to be formally declared to anyone, such as customers, clients or even your bank (whether it’s a personal or business account). Consequently, it’s quite a private arrangement and whilst it will still appear on the Insolvency Register (accessible online), the arrangement certainly won’t be advertised in the local press nor made public to others who might ultimately be deterred from dealing with a company potentially struggling with debt management and credit control.
There are, of course, numerous other benefits for businesses entering into an IVA and these include the following factors:
- Once an IVA has been accepted and entered into then no further charges can be applied to any trade accounts; meaning that the debt amount becomes much more manageable and won’t spiral out of control.
- If the business or company owns any sort of property (for example, workshops, offices or other premise types) these won’t be affected by an IVA. Consequently, whilst there may be a requirement to release any equity during the last year of the IVA, a sale of any business premises certainly won’t be enforced, meaning that the business concern can still continue to trade without any ultimate impact on any required workspace.
- If the business employs any staff then these don’t need to be notified about the IVA. This, in itself, has numerous benefits – not least of all, the fact that staff won’t start to look for employment elsewhere in the belief that their job might be on the line or that the company might cease trading without any prior notice.
- Customers and clients can continue to trade with the company as normal and won’t be made aware of the IVA – hence there shouldn’t be any level of uncertainty for future trading or orders.
- Unlike bankruptcy, any director of a limited company can continue to remain on the register at Companies House and won’t be forced to step down as Director. For most, this is a massive bonus of entering into an IVA and makes debt management much more achievable.