CVAs Wrongly Criticised

According to the British Property Federation (BPF), the recent criticism of company voluntary agreements (CVAs), mainly over cases like JJB Sports, as a viable insolvency solution has been ill judged.

A CVA is a process whereby a company with debt problems or that is insolvent can reach a voluntary agreement with its business creditors regarding repayment of all or part of its corporate debts over an agreed period of time.

It can be a quick, flexible way of saving a business and need not provide for full repayment of all liabilities, only more than could otherwise be expected were the company to enter liquidation

Speaking at the recent Insolvency Today annual conference, the BPF argued that its members like the transparency of CVAs and accept that they are insolvency tools that do not always work. But what should be remembered is that landlords in both cases received rent on units for another two years.

It was also agreed at the conference that everyone who enters into a CVA does so with their eyes open and that shop owners have become much more aware of the importance of having some form of dialogue with their landlords, and attempting to come to a compromise that suits all concerned.

However, some critics at the conference argued against the use of CVAs, saying that they are not always the answer to all of the problems a business heading for financial danger might encounter.

Tim Close is an accountant specialising in business insolvency, debt recovery and business rescue.

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