R3 and Fieldfisher launch new Covid-19 CVA Standard Form for smaller businesses

The insolvency and restructuring trade body R3, with the assistance of European law firm Fieldfisher, is pleased to launch a new Covid-19 Company Voluntary Arrangement (CVA) Standard Form for smaller businesses.

  With the expectation that SME companies are likely to be most affected by the pandemic, R3 has developed the R3 Standard Form Covid-19 CVA Proposal and Standard Conditions to provide members with another tool in their arsenal to assist their clients.


Summary

The Standard Form documents are intended for use by SME companies whose businesses have been affected by Covid-19. They are intended to save time and costs, and therefore make CVAs more accessible to the SME market.

The introduction of the Standard Form is not intended to replace the professional advice and judgement of insolvency practitioners who may be advising companies, but will form part of their arsenal of available tools to assist their clients.

It is a foundation upon which the appropriate CVA can be based.

The Standard Form

Given the flexibility of CVAs, it would be impossible to create a template to tackle all the variations that may be necessary.

R3 expects that most of the CVAs proposed using these Standard Form documents will amend their terms to ensure they are suitable for the facts of the case.

This base form has been drafted to fit the following criteria:
 

• A directors' proposal – The vast majority of CVAs are proposed by a company’s directors and so the Standard Form is drafted for this situation, rather than for proposals made by an administrator or liquidator.

 

• A delayed payment in full – The Standard Form provides for a breathing space period followed by a delayed payment of 100% of the company’s debts. It is designed for use by companies whose businesses have been hit by the Covid-19 pandemic and which need some time to get their businesses fully operational. Creditors with pre-CVA debts are consequently prevented from enforcing debts against the company while the CVA is in operation. Trading costs incurred during the CVA are to be paid out of new trading income. Continuation of the business will permit regular contributions to be made to the supervisor out of operational cash flow.

The Standard Conditions

The Standard Conditions are based to a large extent upon R3’s Standard Conditions for Individual Voluntary Arrangements, with amendments mutatis mutandis appropriate for companies.

R3 kindly asks members and professionals to familiarise themselves with the explanatory note before reading the Standard Form and Standard Conditions.

All documents can be accessed HERE.


Final comment

The creation of the Standard Form and Standard Conditions was orchestrated by Stewart Perry, a restructuring and insolvency partner at European law firm, Fieldfisher, and Professor Peter Walton, Professor of Insolvency Law at the University of Wolverhampton, both members of R3’s General Technical Committee.

Any errors that the documents may contain are R3’s (please see the disclaimer below), but we were also fortunate to have the assistance and constructive criticism of others in reviewing clauses or parts, all giving up their time for free, in an effort to help the profession and respective clients.

Members may also wish to listen to episode 4 of the R3 Podcast, which comes in two parts. Part one of this episode is with Professor Walton who discusses the meaning of a Voluntary Arrangement and why they are a good option for companies, small and large.

Part two of this episode is with Stewart Perry who discusses the proposal in detail, along with the meaning behind it. To listen, please click here.

If you use the Standard Form and/or the Standard Conditions, R3 asks that you send a copy by email to Ben Luxford here. This information will enable us to assess the uptake and the changes being made.
Versions for Scotland and Northern Ireland are to be made available by R3 shortly.

For more information, please contact a member of the Fieldfisher restructuring and insolvency team or the R3 Technical Team.

Disclaimer - The Standard Form and Standard Conditions are not intended to be statements of law, will not be appropriate for any case until suitably modified, and are not a substitute for professional or legal advice. R3 and its contributing editors believe that both documents are accurate but accept no liability for any fault, error, negligence or omission howsoever caused, or for any loss or damage of any kind resulting from reliance on their contents.