Running a Business in an IVA, Question by Question
How sole traders and directors keep trading through an IVA.
Can I run a business while in an IVA?
Yes. One of the biggest advantages of an IVA over bankruptcy is that you can keep running your business while you deal with your debts. Whether you are a sole trader or a company director, an IVA is designed to let you carry on trading, since your business is usually your means of funding the arrangement. A few practical points need handling, but trading continues.
What if I'm a sole trader?
Your business and personal debts are dealt with together. As a sole trader you and your business are legally the same, so your business debts, including money owed to suppliers or HMRC, are personal debts that can go into your IVA. You keep trading throughout. Your income is assessed from your business accounts and projections, and the tools and assets you need to work are normally protected.
Can I stay a company director?
Usually, yes, unlike bankruptcy. An IVA does not disqualify you from acting as a company director. You can remain in post and keep running the company. This is very different from bankruptcy or a debt relief order, which prevent you acting as a director. The main thing to check is your company's articles of association, which may contain an insolvency clause.
What is the articles of association issue?
Some articles require a director to step down on insolvency. A number of companies, especially those using older standard articles, include a clause stating that a director must vacate office if they enter an arrangement with creditors. Where this applies, you may need the shareholders to amend the articles, or to resign and be reappointed. For an owner-director this is usually straightforward; otherwise it needs others' agreement.
What about personal guarantees?
They should be listed in your IVA. If you have personally guaranteed company borrowing, that guarantee is a potential debt you owe, so it should be included in your IVA as a contingent liability. This protects you if the company later cannot pay and the guarantee is called in. Leaving guarantees out can cause serious problems down the line, so make sure your adviser knows about them.
What happens to my business bank account?
It needs careful handling, especially if you bank where you owe money. If your business account is with a bank you owe money to, entering an IVA could prompt them to review or withdraw the company's facilities. It is often sensible to keep business banking separate and, where needed, with a bank you do not owe. Your adviser can help you arrange this before the IVA starts.
Will I lose my business assets or tools?
Generally, no. The tools, equipment and assets you genuinely need to run your business and earn a living are normally protected in an IVA, just as a reasonable car or household goods are. Taking them would undermine your ability to keep trading and funding the arrangement, which helps nobody. Genuinely surplus or high-value assets you do not need might be looked at, but essentials are kept.
How is my business income assessed?
Through your accounts and a cash-flow projection. Because business income varies, your supervisor will usually look at recent accounts and a forward projection, often over twelve months, to work out a fair, affordable monthly payment. Reviews then keep this in step with how the business actually performs. This is a little more involved than for an employee, but it is well-established and designed to be realistic.
Should I get advice?
Yes, business IVAs are more involved. If you run a business, it is worth using an adviser or provider experienced with self-employed and director cases, who can handle the cash-flow projections, articles, guarantees and banking properly. A free initial conversation can tell you whether an IVA suits your situation and protects your livelihood. It costs nothing to find out where you stand.
