Insolvency trade body R3 has announced that it has simplified the process of putting together a proposal for a company voluntary arrangement (CVA) for small businesses.
The trade body has developed a free Standard Form for Company Voluntary Arrangements (CVAs), which aims to make it easier for small businesses affected by the COVID-19 pandemic to enter a CVA by providing a foundation for directors’ proposals to be developed.
The new R3 COVID-19 CVA Standard Form, which is available from R3’s website, includes a breathing space period to allow a business time to restructure without fear of action from its creditors, to be followed by a payment period where a company’s debts are paid in line with the CVA agreement. No recommendations have been made for the timescales of these periods, in order to allow the business and its creditors the freedom to negotiate them.
An additional introductory period of a maximum of three months is also included in the document for businesses who haven’t resumed trading as a result of the COVID pandemic, as well as the ability to temporarily halt payments if the business is in local lock-down.
The Form has been drafted by R3’s General Technical Committee (GTC) Chair Stewart Perry, a Partner at European law firm Fieldfisher, and Professor Peter Walton, Professor of Insolvency Law at the University of Wolverhampton and a member of R3’s GTC. It has had comment and constructive criticism from a broad range of insolvency professionals, all working for free to seek to help the SME market in these unprecedented times.
Stewart Perry said “SMEs are the backbone of the UK economy, but these businesses have been hit hardest by COVID-19 and the subsequent lockdown. As a result, many of them will have been forced to consider an insolvency process or seek insolvency advice when they would most likely have never had to in normal circumstances.”
“These documents aim to make CVAs as accessible as possible to them so they can benefit from the flexibility and business rescue support a CVA provides.”
“We recognise CVAs are a bespoke process, so this isn’t intended to be a template for each and every case, but we hope it will provide a useful foundation for anyone looking to enter one.”
“This is one of many tools available to insolvency practitioners, and with early advice can help management rescue their company, paying their creditors and keeping their employees in work.”
Professor Walton said “Our CVA Form provides a clear outline of the CVA process. It details what businesses need to do to reach an agreement with their creditors, settle their debts, and turn their situation around.”
“We hope it will enable more businesses to benefit from CVAs by making the process more understood and more accessible – and that by doing so, it will help more businesses stay open, preserve more jobs and keep more money flowing through the economy.”