Call for change for CVAs
By Sarah Wood | 7th January 2021
The British Property Federation is calling on the UK government to tackle the "abuse" of CVAs.
In a letter addressed to Lord Callanan, corporate responsibility minister, the group which represents landlords said the flexibility and low cost of the UK's insolvency framework has led to businesses abusing the CVA process, as reported by Retail Gazette.
The BPF also said commercial landlords were being hit particularly hard by the arrangements, which can be voted through by creditors who are less affected.
The letter follows a surge in CVAs across all sectors, including retail, as a result of the Covid-19.
High street names including New Look, Moss Bros and Ann Summers have all launched a CVA in recent months, in a bid to cut rent and close down stores.
Melanie Leech, BPF chief executive, said the abuse of CVAs distorted competition, undermined property rights and was weighted in favour of businesses which are performing badly.
The BPF has urged the government to make five key changes to the process:
- Ensure large CVAs are independently scrutinised
- Ensure CVAs can no longer be used to enforce permanent changes to contracts
- Extend the current 14-day notice period of the CVA creditors' meeting to 28 days
- Reform the voting procedure to give greater weight to the votes of those directly affected by CVAs
- Provide clear direction on how rent is factored in voting purposes to prevent businesses and insolvency practitioners from manipulating the vote by discrediting property owners
The letter says that the coronavirus crisis has brought abuse of the process into focus, which the BPF has already been highlighting for years.
It said that CVAs are damaging the high street and putting well-run businesses at a competitive disadvantage.
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