Vol 15 (2018) - Issue 4

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The Future of CVAs – Not Just for Leases

The Company Voluntary Arrangement ('CVA') was introduced into English insolvency law by the Insolvency Act 1986 (the 'IA 1986'), as a result of recommendations made in the Cork Report1 in 1982. Commensurate with its position at section 1 of the IA 1986, it was expected that the CVA would become a key restructuring tool available to companies under English law, in particular in allowing a debtor and its unsecured creditors to implement a restructuring solution efficiently and outside of formal insolvency proceedings.2 However, in the intervening years the CVA has become more of a niche restructuring tool than a ‘mainstream’ regime (arguably with the exception of its use by smaller companies who can avail of a moratorium as part of the CVA process3). The CVA has, to a large degree, been limited to compromising lease and other property liabilities in the retail and casual dining sector (2018 alone has seen CVAs from a number of companies in the sector, including New Look, House of Fraser, Prezzo, Byron, Mothercare and the ultimately unsuccessful Toys ‘R’ Us CVA). A key drawback of the CVA, when compared with the English law scheme of arrangement under the Companies Act 2006 is the inability to bind secured creditors (see further below). This has undeniably limited the utility of the CVA in complex secured capital structures.