Firm wins government tender on CVA report

The Insolvency Service has appointed consultancy firm RSM to undertake quantitative research into how landlords are treated in company voluntary arrangements, in what has been labelled as an “encouraging” step for commercial property owners. By conducting this research exercise, the government aims to understand how landlords are considered compared with other creditors in CVAs undertaken by large businesses in retail, accommodation or food and beverage services. This will include producing a summary report that the Insolvency Service’s analytical and policy teams will use to support their evidence gathering. Citing concerns raised by the British Property Federation that CVAs unfairly target commercial landlords, the government body said in its November contract notice: “There have been a number of legal challenges to CVAs brought forward by landlords, for example New Look and Regis. Broadly speaking, the challenges have not been successful. “Such challenges have led to ongoing questions about the underlying policy that supports the legal framework in this area. Therefore, the authority is looking to undertake research to form a more complete picture of the issue.” The audit firm won the one-off contract following a competitive tender process that began last year. The reports and research are expected to be completed by 31 March. Hearing industry calls While the government has stopped short of conducting a full review of CVAs as a debt restructuring tool, the BPF has praised the move as a positive sign that it is hearing the industry’s calls for reform, after several years of campaigning. Melanie Leech, chief executive of the BPF, told EG: “Fundamentally, we think the way the legislation is being used is not in the spirit in which it was intended. [The tender] feels like a signal that the message has been heard and that people are at least prepared to take a look at [our argument].” Leech added that the report will be timely, given that a “demand surge” for CVAs could soon be on the cards. “If you think about where we are with the moratoriums, there is a recognition there will potentially be more CVAs and restructuring plans coming at some point,” she said. “While the policy is to try and get as many businesses through the pandemic as possible and to use the leverage of what will be the Covid Rents Act to enable that… they’re probably not going to get through forever. Those that do survive will probably want to fundamentally rethink their businesses.” Hopes for a full review Laurence Raeburn-Smith, head of retail policy at the BPF, said: “It’s not quite the full government review of CVAs and some of the problems with the wider insolvency framework that we had been pushing for and would like, but it’s definitely a necessary step on the way to that. “Given that it’s going to report in March, this is actually moving at quite a significant pace. Hopefully, this will result in the government taking a look at the issues that we’ve been telling them have been there for years.” He added: “There is the perception that issues relating to CVAs are exclusively a landlord problem. But over the past year or two, we have certainly seen a lot more local authority involvement within some of the big CVAs that have come through. I imagine that might be part of the government’s thinking in wanting to have a look at this.” To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews