CVA changes welcomed

PROPOSED changes to the way Company Voluntary Arrangements (CVAs) are managed have won the support of North West insolvency practitioners.
 
In a survey by the insolvency trade body R3, three-quarters of insolvency practitioners in the region said all companies trying to agree a CVA should be given protection against creditors. At present only small companies can apply for a moratorium to protect them against creditors.

A CVA is where a company comes to an agreement with creditors to reorganise its debt. Only around 500 CVAs are completed annually but the procedure has been given a higher profile in recent months after it was adopted by the retailers JJB and Focus DIY. 
 
The government is proposing a 42-day moratorium period for companies of all sizes entering a CVA. Some 76% of insolvency practitioners in R3’s survey felt it would be helpful for medium and large-sized businesses to be allowed a 28-day moratorium period, while 63% backed the government’s proposals.
 
David Gray, a spokesperson for R3 in the North West and a partner at Eversheds in Manchester, said: “CVAs are a good rescue tool, helping businesses which are profitable in the long-term overcome a period of financial difficulty, but the current rules deter many companies.
 
“A ‘safeguarding’ period, where both the company and the insolvency practitioner are protected from liability, may help to make the CVA a more viable option. In this recession, the more options we have to save companies and jobs, the better.
 
“However, another reason so few CVAs are processed is that business owners leave it too late to seek help and it therefore becomes harder to persuade creditors that the company is in a fit state to be saved. Businesses need to take advice early if they want to benefit from this option.”

R3’s poll was sent to 2082 insolvency practitioners. The organisation received 365 responses, 47 from the North West.