The insolvency and restructuring industry’s main trade body R3 has launched what it is calling a ‘standard form’ for Company Voluntary Arrangements (CVAs).
It’s hoped that the new resource will make it easier for small businesses to be entered into CVA deals that help their directors reorganise and restructure their operations in ways that represent a more sustainable financial footing.
The forms are being made available without charge via R3’s website, with their development partly motivated by an awareness that the Covid-19 crisis is pushing a growing number of small businesses into serious financial difficulty.
Outlined within the contents of the ‘R3 Covid-19 Standard Form’ documents are statements regarding breathing space periods that would give struggling businesses the opportunity to restructure and reorientate without the fear of having to fend off creditor actions.
The forms do not specify how long a breathing space period might last but do outline a framework for plans designed to ensure companies pay off their debts over time in line with the terms of a given CVA agreement.
It is intended that the forms will function as a basis for proposals that company directors can put forward to their creditors in the context of CVA negotiations.
Additional aspects of the forms include details that relate directly to the pandemic and reference situations in which businesses have needed to close because of local lockdowns or because they haven’t yet been able to restart their operations following the initial Covid-19 lockdown that began in late March in the UK.
Stewart Parry, general technical committee chair at R3, who helped draft the ‘standard form’ documents, has said he hopes it opens up the flexibility and support that CVAs offer to small businesses who might need those benefits to survive and potentially prosper in future.
“SMEs are the backbone of the UK economy, but these businesses have been hit hardest by COVID-19 and the subsequent lockdown,” he said.
“As a result, many of them will have been forced to consider an insolvency process or seek insolvency advice when they would most likely have never had to in normal circumstances.
“We recognise CVAs are a bespoke process, so this isn’t intended to be a template for each and every case, but we hope it will provide a useful foundation for anyone looking to enter one. “