2018 has seen a wave of company voluntary arrangements ("CVAs") hit the market, with high profile companies such as House of Fraser, Carpetright, New Look and Homebase (to name a few) all making use of this restructuring tool. This briefing note explains how a CVA works, provides an overview of current "market" themes, and makes some predictions on the future of CVAs.

EVOLUTION OF THE CVA

2018 has seen a wave of company voluntary arrangements ("CVAs") hit the market, with high profile companies such as House of Fraser, Carpetright, New Look and Homebase (to name a few) all making use of this restructuring tool. This briefing note explains how a CVA works, provides an overview of current "market" themes, and makes some predictions on the future of CVAs

EVOLUTION OF THE CVA

In my May 2018 article ‘Insolvency calls time on pursuing claims’, I looked at how various moratoria apply to stop claims when a party enters into certain insolvency processes. I offered a taster when I said that adjudicator’s awards were a strange species because they are not final and binding, that this complicates their enforcement, and that I would look at the complex interaction between insolvency and the enforcement of adjudicator's awards soon.

What is a CVA?

A CVA is an insolvency and rescue procedure under the Insolvency Act 1986, allowing a company in financial distress to make legally binding arrangements with its unsecured creditors. Typically, this involves rescheduling or reducing the company’s debts or even amending certain contractual terms.

The UK Government is implementing measures to strengthen corporate governance and insolvency laws. The aim is to increase accountability, improve creditor protection and promote company rescue. This note comments on a selection of the proposals which were published at the end of the summer.

Transparency and shareholder stewardship

Restructuring & Insolvency analysis: Iain Pester, barrister at Wilberforce Chambers, advises that the judgment in the case is a timely reminder that not everything of economic value will necessarily vest in a trustee in bankruptcy pursuant to section 306 of the Insolvency Act 1986 (IA 1986).

Unlawful Means Conspiracy

Ashfords successfully acted for the Joint Trustees in Bankruptcy of Vincent Mascarenhas (deceased) in their application to discharge Freezing Orders, an Interim Charging Order and an Interim Third Party Debt Order obtained by creditors of the late Bankrupt in 2014. The Joint Trustees were not a party to the original proceedings but had standing to make the applications.

A recent High Court case (Fairhold Securitisation Limited v Clifden IOM No 1 Ltd) has affirmed that in debt issuances involving a trustee, noteholders have only limited rights to take direct enforcement action. The case confirmed that:

Recently, there have been a number of high profile insolvencies hitting the headlines with a number of High Street retailers entering insolvency either by proposing a company voluntary administration (“CVA”) or via another formal insolvency process. With the recent number of high profile insolvencies there has been scrutiny of directors’ duties not only by media but also at government level.