Professor Peter Walton from the University of Wolverhampton has been instrumental in the creation of a new form which aims to provide support with debt for small and medium-sized enterprises during the current pandemic.
It is designed for use by companies whose businesses have been hit by Covid-19 and which need some time to get their businesses fully operational. It provides for a breathing space period followed by a delayed payment of the company’s debts and will hopefully help save jobs.
Professor Walton, Director of the Law Research Centre, said: “In these desperate economic times, many companies are struggling to see a way through the maze of local and national trading restrictions.
“Many fundamentally sound businesses have become distressed due to the stop/start nature of trading conditions.
“The options for such companies are reasonably limited and may not lead to an optimum outcome for the companies or their creditors; administration and liquidation see a great deal of a company’s wealth being expended on costs and fees.
“Due to my position on the two main national Insolvency Technical Committees, I recommended that the insolvency community should react to the Covid-19 crisis by engaging in a significant, non-paid activity which I co-led.
“From this project, the Association of Business Recovery Professionals (R3) has launched a new Covid-19 Company Voluntary Arrangement (CVA) Standard Form for SME businesses.”
A CVA allows a company to settle debts by delaying payment of debts or by agreeing with creditors to pay only a proportion of the amount owed.
Creditors with pre-CVA debts are consequently prevented from enforcing their debts against the company while the CVA is in operation. Trading costs incurred during the CVA are paid out of new trading income.
Continuation of the business permits regular contributions to be made to the CVA supervisor for distribution to creditors out of operational cash flow.
Use of the Standard Form is intended to save time and costs, and therefore make CVAs more accessible to the SME market.
Co-managing the project with Professor Walton was Stewart Perry, a restructuring and insolvency partner at European law firm Fieldfisher. Both are members of R3’s General Technical Committee.
The Standard Form documentation has been made freely available and follows several months of meetings with various Government and commercial bodies, including HMRC, as well as taking soundings from many expert practitioners.
The Standard Form has been adapted for use in Scotland and Northern Ireland. Relevant documentation is available online.
Any companies interested in considering a CVA should take advice from a licensed insolvency practitioner.