Review Of Company Voluntary Arrangements ("CVAs")

• Published date: 04 July 2022
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Insolvency/Bankruptcy/Re-structuring, Corporate and Company Law, Insolvency/Bankruptcy, Landlord & Tenant - Leases
• Law Firm: Hogan Lovells
• Author: Alexander Snell, James Maltby and Margaret Kemp

On 28 June 2022 the Insolvency Service published a report it had commissioned from RSM UK to assess the impact that CVAs were having on commercial landlords (the "Report"). The Report was commissioned in response to a number of concerns from landlords, particularly commercial landlords with tenants in certain sectors, that they were being treated unfairly in CVAs when compared to other classes of creditor, and against a backdrop of high profile court challenges - particularly in the case of CVAs proposed by large high street retail and hospitality tenants in the period between 2018 and 2020.

The Report sought to answer the following three questions that had been put by the Insolvency Service:

• How do outcomes for landlords in large business CVAs from either the Retail trade, Accommodation or Food and beverage service activity compare to other creditors?
• Are landlords equitably treated, compared to other creditors in large business CVAs from either the Retail trade, Accommodation or Food and beverage service activity?
• If such a finding is made, to identify what specific levers in the framework are causing the issue and how.

The short answer from the analysis? No: broadly, commercial landlords do not appear to be treated inequitably The analysis also concluded that the CVA remains an important, cost-effective and flexible restructuring tool available to debtors to enable to business to survive as a going concern.

The longer answer is, well, a bit longer, and the true position as to the compromises imposed on commercial landlords could well be understated. It is also likely that further analysis into the impact of CVAs on commercial landlords will be required.

Methodology

The report was asked to consider CVAs between 2011 and 2020 proposed by large companies in the Retail trade, Accommodation or Food and beverage service activities. Of the 5,106 CVAs proposed in that time, the Insolvency Service identified 747 that were proposed by companies in the retail trade, accommodation, and food and beverage sectors. Of these, 82 were proposed by "large" companies,¹. The authors of the Report had access to 59 of those 82 proposals and these formed the basis of the analysis (the "Proposals"). The Report was therefore based on a review of just over 1% of the CVAs proposed in the relevant period and just under 8% of those proposed in the relevant sectors in that period.

Question 1: How do outcomes for landlords in large business CVAs from either the Retail trade...