Company Voluntary Arrangements and AIM Listed Companies

Using Company Voluntary Arrangements to Restructure Insolvent AIM Listed Companies

In 2000, Antony Batty, one of the Licensed Insolvency Practitioners at Antony Batty and Company, pioneered the use of Company Voluntary Arrangements to reorganise and restructure AIM listed companies that had entered insolvency, enabling them to relist. This provided value for creditors and shareholders. Prior to this, the most likely outcome would have been liquidation.

This article looks in more detail at the use of Company Voluntary Arrangements in the arena of insolvent AIM listed companies, a specialism of Antony Batty and Company – click here for a recent testimonial from CogenPower PLC.

Licensed Insolvency Practitioner
Antony Batty, CVA Specialist

Insolvent Listed Companies Still Have Some Value

With insolvent listed companies, the very fact that they are listed means that they still have some value because of the considerable costs that are associated with gaining a new listing on the London Stock Exchange, The Alternative Investment Market or Ofex. Professional fees can run into hundreds of thousands for preparing a listing. For that reason, dormant listed companies – usually referred to as shell companies – are attractive to other companies wishing to list if they can be reversed into the shell, thus avoiding the cost of listing.

The Key is to Restore Solvency by Using Company Voluntary Arrangements

In order to realise the value of this potential asset, the shell company needs to be restored to solvency by restructuring its balance sheet. This is done through the use of company voluntary arrangements. Here, the creditors of the insolvent listed company exchange their debt for shares in the new company, under the terms of the CVA. The acquirer may also pay monies into the CVA for distribution to the creditors in addition to their receipt of shares.

Click here for our CVA flowchart which summarises the process.

How are Likely Candidates Identified?

The 3 main determinants to identify likely candidates are:

What Determines the Likelihood of Success? Specialist Knowledge is Required

Even if the above conditions are met, success is only likely if there is commercial interest in the restructured company as a shell. The main concern of the insolvency practitioner is always to restructure the company, using the CVA, to return it to solvency. However, in these situations further specialist knowledge is required:

This means the insolvency practitioner must work closely with the company’s brokers and other professional advisors.

What are the Requirements for a Successful Re-listing?

For the shell company to be re-listed:

This is Where Company Voluntary Arrangements Come in

In the absence of any cash injection into the insolvent PLC or AIM listed company, a CVA is used to restore solvency in the company. CVAs allow creditors to waive their debt or exchange it for shares on the basis that the re-listed company can be easily sold. It is for this reason that CVAs involving debt for equity swaps offer creditors some degree of recovery. If the company was liquidated instead, no funds would be available to the creditors.

Contact us for More Details on the use of Company Voluntary Arrangements in Insolvent Listed Companies

Interested in this Company Voluntary Arrangement Testimonial? Want to find out more?

If you or your business is facing insolvency, the sooner you contact us, the more we can help.

Contact us for a FREE Initial Consultation

AIM listed company insolvencies and the use of Company Voluntary Arrangements require the insolvency practitioner to have specialist expertise. Antony Batty & Company has that specialist expertise, and has assisted more than 20 AIM listed companies restructure and re-list successfully.

Contact Antony Batty or call us on 0208 088 0633 for more details on this specialist area of insolvency. The initial discussion is FREE. With offices in Central London, Essex, Salisbury and the Cotswolds, we have good coverage of the country.