Individual Voluntary Arrangement Case Studies

CASE STUDY
INDIVIDUAL VOLUNTARY ARRANGEMENT (IVA) FOR A COMPANY DIRECTOR

BACKGROUND:

A successful company director was suddenly subject to financial difficulties following a fire caused by an arson attack on an adjacent building.

The Company’s trading premises were severely damaged, destroying not only company records but vehicles, equipment, warehousing capabilities and clients goods held in storage.

Although there was insurance cover, underwriters didn’t pay out in full and weren’t prepared to take legal action against the neighbouring building despite evidence of negligence.

Trading was interrupted for many months. However it was believed the company could continue, but required capital, which was injected by taking out a personal loan.

The Company never fully recovered and entered into liquidation, leaving the director with a substantial amount of personal debt. In bankruptcy this would have resulted in the matrimonial home being sold.

ACTION TAKEN:

Following a meeting with the director, the following steps were taken to enable the debtor to avoid bankruptcy:-

  • Full review of the individual’s financial position and personal assets.
  • Review of the business liabilities to ascertain those which were company related and not personal.
  • Liaison with the Bank regarding nature and extent of personal liabilities, and other company related debts which were personally guaranteed both jointly and severally liable with individual’s brother.
  • Negotiation with a third party to enable additional funds for the IVA which would not otherwise be available in bankruptcy.
  • Agreement of IVA proposal.

END RESULT:

The IVA was successfully completed and the individual was able to continue in employment, without the financial burden of debts incurred as a result of investing in his company.

A lump sum payment was negotiated for the benefit of creditors, together with monthly payments by the individual in to the IVA.

This resulted in a dividend being made available to creditors, as opposed to no return in bankruptcy.