Abstract
AbstractCompany Voluntary Arrangements (CVAs) are designed to be used in the UK to rescue a company as a going concern. They are under used in practice and have a reputation for high failure rates. This article, based upon a longer report funded by the UK insolvency profession, considers the nature of success or failure of CVAs. It considers empirical evidence to identify the weak points of CVAs in practice. It looks at quantitative data as well as taking into account views of practitioners and other stakeholders. Key elements of the CVA procedure are considered in light of recent national reform proposals and approaches and reforms internationally. Domestic reforms in the Netherlands and South Africa are considered to determine whether any lessons might be learnt from other jurisdictions. Recommendations are made including changes to the suggested amendments to the legal framework and to professional practice guidance.
Highlights
Despite the availability of this flexible restructuring tool for over three decades, the frequency of Company Voluntary Arrangements (CVAs) is reasonably low when compared with alternative corporate Insolvency Act 1986 procedures and it has been commented that CVAs have a high failure rate
8 | CONCLUSION—RECOMMENDATIONS FOR REFORM OF CVAS. It is clear from the findings considered above, and in more detail in the Report, that the CVA is a flexible tool that takes many forms with varying aims
The outcomes are incredibly varied, with even terminated CVAs offering potentially improved outcomes compared to the best alternative
Summary
The CVA has risen to prominence recently with a number of high-profile cases drawing media attention and, at times, creditor criticism.. The CVA has risen to prominence recently with a number of high-profile cases drawing media attention and, at times, creditor criticism.3 It is in this context that the authors were commissioned by R3, the Association of Business Recovery Professionals, and the ICAEW, to consider the reasons for the “success” or “failure” of CVAs and investigate the outcomes where CVAs fail. The aim of the project was to identify key characteristics which will allow practical guidance to be provided to insolvency practitioners (“IPs”) and inform policy recommendations to Government. This led to the publication in May 2018 of Company Voluntary Arrangements: Evaluating Success and Failure (“the Report”).. The findings and recommendations of the Report are of continuing importance in light of the continued negative publicity surrounding CVAs, developments in judicial interpretation and the reform proposals subsequently published by the Government in August 2018 (discussed below in Section 7.3) but yet to be implemented at time of writing
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