Vol 2 (2005) - Issue 3

Article preview

"Five Loaves and Two Fishes" ... English Cathedral Rescued by CVA

On 12 August 2004, the Cathedral Church of Saint Peter, Bradford, England (the Bradford Cathedral) entered into a company voluntary arrangement (CVA) with its creditors and I was appointed as the Supervisor of the arrangement. Additionally I was supported from a legal perspective by Philip Mudd and Caroline Whittington of Walker Morris Solicitors, Leeds. This is the first time that a cathedral in the UK has been subject to a CVA, or any other formal insolvency process. Two questions will probably come to mind immediately:

- How can a cathedral become insolvent?
- Is CVA an appropriate rescue procedure for such a body?


Insolvency

The Bradford Cathedral’s financial difficulties resulted not from its day-to-day activities, but from the failure of its Millennium project. The project’s ambitious goal was to establish a multi-faith visitor attraction in Bradford, celebrating and explaining the history of religious belief. Regrettably, the number of visitors projected by Bradford Cathedral’s advisers proved to be highly optimistic and, after only a few weeks, the doors were closed. The project had failed.

A limited company had been formed to operate the visitor attraction on a day-to-day basis. However, the substantial expenses and liabilities involved in setting it up had been incurred by Bradford Cathedral itself. These included the cost of acquiring, renovating and adapting premises; the purchase of specialist IT; and the substantial fees of specialist advisers. The project was financed by a combination of loans and grants. When the project failed, there was no revenue to service the loans and the grants became repayable.

For a number of years these liabilities hung over Bradford Cathedral and the threat of formal insolvency disrupted its ministry in Bradford, a predominantly Muslim community. It was difficult to recruit and there was a serious risk to its survival. This is a familiar story in the corporate world - but how could this happen in the context of the Church of England?

The cathedral’s constitution

In England, cathedrals are governed by the Cathedral's Measure 1999 (the Measure). The Measure was passed by the General Synod of the Church of England and has Parliamentary Assent and Royal Assent in accordance with the provisions of the Church of England Assembly (Powers) Act 1919. The Measure therefore has the same force and effect as an Act of Parliament.
The Measure stipulates that the Constitution of a cathedral must:

provide that the members of the Council, the Chapter and the College of Canons are a body corporate with perpetual succession and a common seal.

Each cathedral therefore operates as a separate body corporate, standing on its own financially. It is not merely an emanation of the wider church. It is the Dean and Chapter that together deal with the administrative aspects of a cathedral and who enter into documentation on its behalf. In this respect they are analogous to the board of directors of a limited company.

Administration and CVA

Having identified both Bradford Cathedral’s insolvency and its status as a body corporate, the remaining question was whether there was an appropriate formal mechanism through which to effect its rehabilitation? Its new Dean, and all those involved in running Bradford Cathedral, were determined to put its affairs in order and, if necessary, to subject Bradford Cathedral to the same procedures and rigours that would apply to any other person or company.
Both administration and CVA used to be reserved to companies incorporated under the Companies Acts.