01 July 2022
Government research conducted by leading audit, tax and consulting firm, RSM UK has found that commercial landlords are treated equitably in company voluntary arrangements (CVAs).
RSM’s research was commissioned by the government’s Insolvency Service to understand concerns within the commercial property sector on the utilisation and impact of CVAs, concerns focusing on compromises to rental debts and inequitable amendments to long-term leases.
Utilising a data sample of 59 CVA proposals, RSM’s team led by restructuring advisory partners Gareth Harris and Damian Webb, with support from restructuring advisory director Stephanie Sutton, found that in 47 of the 59 CVAs under review, 85% or more in value of the unconnected creditors voted in favour of the CVA proposal, showing that the majority of CVAs are passed or approved by a significant majority of landlords and other creditors.
The report also highlighted examples of best practice to improve stakeholders’ understanding of the CVA process. Recommendations included widespread consultation between the company and its key stakeholders, to enable change or amendment if required, improvements to length and clarity of proposals, and, in instances where landlords are being compromised, consultation with the British Property Federation (BPF) to ensure consultations are transparent and meaningful.
Damian Webb, restructuring advisory partner at RSM UK, said: ‘Landlords have raised significant concerns and challenges to the appropriateness of the CVA process. However, using a robust sample size our research illustrated that landlords have been broadly equitably treated within CVA processes and have not been demonstrably prejudiced for the benefit of other classes of creditors. The recent case law has codified many of the Landlord’s principal challenges to CVAs, this case law combined with this research should therefore hopefully address many of the misconceptions with CVAs. CVAs fundamentally remain a flexible valuable restructuring rescue tool, providing a better and balanced outcome for all stakeholders as compared to alternative insolvency options, notably administration or liquidation.’