Company voluntary arrangements must be bound by stricter rules, says Ed Cooke, chief executive of commercial property body Revo.
Clearly property owners, and indeed some retailers, are no longer willing to accept the way CVAs are being misused or the unfairness of the process. Over the past six months, there has been greater scrutiny on the circumstances leading to CVA proposals, and creditors are rightly questioning why they should bear the financial burden for mistakes made by business owners or years of underinvestment.
In response to that there has been some progress in terms of the level of engagement and the terms presented to property-owners. We have seen some retailers offer property-owners equity as part of CVA proposal, which may appear generous, but are difficult to appraise given the fact the businesses are in severe financial distress, and have no guarantee of returning to profitability.
We have been working to bring greater clarity as to how and when the CVA legislation should be invoked. We believe it’s crucial that there is constructive discussion between retailers, property owners, insolvency professionals and advisers before a business reaches crisis, and if a CVA is required there are agreed “rules of engagement”.
We also believe CVAs should be scrutinised by independent third parties, and in 2018 wrote to MP Clive Betts MP and suggested the housing, communities and local government select committee call retailers and their advisers to present evidence to justify a CVA proposal.
We continue to urge the government to intervene to prevent the further misuse of CVAs and, in the longer term, to legislate to create a better framework for this type of restructuring. Despite the current political uncertainty, we remain optimistic that the government will act given the size and stature of the companies now involved and the number of UK jobs potentially in jeopardy.