IVA’s and publicans
The word IVA has become very common these last few years as increasing numbers of people in debt have now got one. But what is it and how do I know if I need one and can it really be the best solution when trying to resolve my debts?
There are basically six ways to get out of debt and you need to choose one based on your circumstances:
1. Bankruptcy & DRO (Debt Relief Orders new for April 2009)
3. Family arrangement (often referred to as debt counselling & adjustment)
4. Sell something (house, car, possessions, yourself!)
5. Doing nothing / bury your head and leave it up to fate (very popular)
6. Savings (use them if you have any and make some if you don’t)
There is arguably a 7th but it is not applicable to all, in essence it’s chasing people who owe you money, your debtors no less! However this article is really concerned about IVA’s and how it applies to those running a pub on lease.
IVA stands for ‘Individual Voluntary Arrangement’ it’s a legal contract between you and your creditors. It’s designed to offer an alternative to bankruptcy; many people have been entering in to this kind of arrangement in order to draw a line under their debts and hopefully move on, in 2008 during the last 3 months some 10,344 people applied for an IVA. IVA’s typically offer your creditors get a % of the debt owed (on average it’s 35%) and you get 5 years to pay it to them, very attractive if you are drowning in debt. Assets such as houses / property are usually included and you may find yourself losing a large slice of the equity in your home after the 5 years is up, a nasty sting in the tail which some people with an IVA have no idea of.
For many years the IVA was mainly the choice of professional people who under bankruptcy would otherwise have lost their employment. The kind of jobs that needed protection from bankruptcy were accountants, lawyers, MP’s, police officers, members of the armed forces, directors of limited companies and trustees to name but a few.
So what about a publican with a lease, because it would seem if all the people listed above use them it must be ok, as a publican can’t go bankrupt either. It has come to light that financially stretched publicans are being advised to take out IVA’s by their accountants, bookkeepers and even their BRM’s No doubt some have even seen adverts in the press or on TV or even chatted with a well meaning customer over the bar about IVA’s
So it’s not surprising given all of the above you would consider an IVA.
But there is a very real danger that should you take out an IVA it can mean you have forfeited your lease and lost your business altogether. Entering in to an IVA can be a terminal event to a lease. Problems arise over not getting correct advice in the first place from the Insolvency Practitioner who sets up the IVA, it is essential you send an IP a copy of any lease you have for their opinion regardless as to whether you owe any money to them. This may come as a surprise because if you took a publican who didn’t owe any money to their brewery / freeholder you wouldn’t have to list them as a creditor on the IVA as you owe them nothing.
The situation surrounding IVA’s and the effect on a lease is so profound that anyone considering an IVA must get explicit written consent from the other parties to the lease that they will not forfeit you in the event of you taking on an IVA. There is also the effect on your license to consider as Section 27 of the Licensing Act 2003 provides that a Premises licenses lapses immediately if the holder enters into a voluntary arrangement with his creditors! Generally the publican is the affected party, although one major pubco at least has a policy of holding the licenses itself, which may overcome the licensing issue – but not necessarily the lease – problem. It would be disastrous to take out an IVA only to see you business taken away from you some time later, so prior to entering in to an IVA must give it very careful thought and planning. If any publican has already taken out an IVA you may be trading on borrowed time and have already lost all the value in your lease.
Anyone wanting a review of their debts or has any questions can contact Chris Wright of Twinpier on office 01825 830422 mobile 07502214457 or firstname.lastname@example.org
Twinpier are specialists at helping people in the licensed trade, with confidential advice on debt and credit problems and with providing alternatives to Bankruptcy / IVA’s
Licensed by the consumer credit act 597380
The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsibility for them, we do try to avoid offensive or litigious statements being made. They are written by concerned professionals in the industry who feel that these issues should be raised to ensure that all licensees are made fully aware of many hidden pitfalls.