Reforms are needed to the current company voluntary arrangement (CVA) process, according to both R3 and the British Property Federation (BPF).
R3 (the trade association for the UK’s insolvency, restructuring, advisory, and turnaround professionals) has published a research report recommending a number of reforms to improve the effectiveness and reputation of CVAs. These include:
- Capping CVAs at three years in duration
- Introduction of a pre-insolvency moratorium
- Defining directors’ and insolvency practitioners’ duties more clearly
- Requiring public sector creditors to explain why they won’t support a CVA
- Introduction of standard CVA terms and conditions
The BPF has also called on the government to undertake an urgent independent review of CVAs, citing three issues in particular with the current system:
- Lack of transparency
- Unfair discrimination between different creditors
- The lack of regulation to ensure CVAs are used appropriately and to drive good practice
It is interesting to note the comments from R3 and the BPF calling for reforms of the CVA process.
Clearly there are legitimate concerns arising from the considerable number of CVAs which are being proposed at the current time.
While it is important that CVAs are not abused, they remain a valuable tool to restructure businesses with large property estates which are no longer fit for purpose. A review of CVAs is sensible to ensure that the competing interests of businesses and creditors (most particularly landlords and their lenders) are properly balanced.