There are conditions which must be met before Commercial Rent Arrears Recovery can be used by landlords to seize goods...
Company Voluntary Arrangements are a means by which a company in financial trouble enlists the aid of an Insolvency Practitioner to help negotiate with its creditors and seek to restructure debts in a way that makes them more affordable and binds all parties. One of the key features of a CVA is that if 75% or more agree to the proposal, the remaining creditors, even if they disagreed are also bound by it. So is there a way for creditors to challenge a CVA they disagree with?
Creditors Looking to Challenge a CVA must act Fast
There are two ways a creditor wishing to challenge a CVA that’s been agreed can proceed and in either circumstance they must act quickly as there is only a 28 day window from the point the CVA has been decided and filed in which to to appeal against it.
The first way to challenge a CVA is due to a ‘material irregularity’ in which the dissatisfied creditor must demonstrate that there was a procedural or other irregularity in the way the Company Voluntary Arrangement came to be approved.
The Second way to challenge a CVA is to cite ‘Unfair Prejudice’ and in this circumstance the creditor must be able to demonstrate that the CVA would treat some creditors differently than others to a significant degree and in a way that is fundamentally unfair.
When Might Creditors Challenge a CVA?
In practice, it’s very rare for creditors to challenge a CVA. While such arrangements, by their very nature result in creditors agreeing to accept smaller payments, reduce debt or both, by agreeing, they generally save their debtor from liquidation which would see them recover even less, or possibly nothing at all.
However, in recent times, there’s been growing disquiet amongst retail landlords in particular who’ve found themselves subject to such arrangements against their will and due to the decisions imposed on them have found themselves forced into (in the case of House of Fraser) 75% discounts on rent. In addition to this, there’s been a feeling that the CVA process has been misused as a way for retailers to get out of contracts and force better rates rather in order to boost profits at the expense of landlords.
If your business is subject to pressure from creditors, then a CVA might be just the solution you need to relieve the pressure, restructure your liabilities and trade your way back to a more secure financial footing. We offer a free consultation, so why not contact us for more information and find out what Lines Henry can do for you.