Vol 17 (2020) - Issue 4

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The Death of the CVA? Landlord Compromises and the Restructuring Plan

Synopsis
The COVID-19 crisis has increased momentum for insolvency law reform. Alongside temporary measures to ease the crisis, the Government has also introduced sweeping changes to UK insolvency legislation. The Corporate Insolvency and Governance Act 2020 ('CIG Act') was introduced as a bill to the House of Commons at the end of May 2020 and received royal assent on 25 June 2020. One of the most significant aspects of the CIG Act is the introduction of the new restructuring plan (the 'Restructuring Plan') which for the first time introduces cross-class cram-down to the UK's restructuring toolbox.

While the restructuring plan is the 'new kid on the block', it does not replace the company voluntary arrangement ('CVA') which (for now) remains a go-to restructuring tool for businesses on the High Street despite its unpopularity amongst institutional landlords. Since the onset of the COVID-19 crisis, there have been signs of a new wave of high profile CVAs as companies seek to address the damage wrought by lockdown, for example Travelodge, The Restaurant Group and AllSaints.

The article considers whether the arrival of the Restructuring Plan as an alternative tool for a company seeking a solution for its burdensome leasehold estate will herald a decline in the CVA. It identifies the key strengths and weaknesses of each process and concludes that, while in certain scenarios the Restructuring Plan may well supplant the CVA as tool of choice, there is likely to still be a future for the CVA. In any given case, the choice is likely to come down to the voting analysis, process and timing considerations, and the Court's willingness to apply cross-class cram-down in the context of a landlord-focused restructuring.