Company Voluntary Arrangements and Rescue: A New Hope and a Tudor Orthodoxy
Journal of Business Law (UK), Forthcoming
28 Pages Posted: 15 Jan 2009 Last revised: 21 Jan 2009
Date Written: January 15, 2009
The Enterprise Act 2002 has attempted to fundamentally change approaches to corporate insolvency regulation in the United Kingdom. By endeavouring to improve the administration procedure first introduced by the Insolvency Act 1986 (IA 86), the Legislature has given paramount consideration to corporate rescue outcomes through the administration procedure, as originally envisaged by the Cork Committee in its seminal report of 1982. In this article it will be argued that the company voluntary arrangement (CVA) regime will be a fundamental ingredient in the post 2004 rescue culture brew. It will be argued that CVA usage will become much more prevalent as part of administration practice, and preferably as a stand-alone consensual procedure pursuant to Part I of the IA 86. Whilst administration can be considered as a means to an end, that end can only be achieved through the use of appropriate restructuring processes. The CVA is one of those processes. In this article, the development of the CVA regime, its purpose, procedure, outcomes, and usage is critically examined. It is argued that in prioritising Administration and the rescue ethos, the Legislature has returned to a fundamental concept of English insolvency law, namely equality of treatment amongst creditors. In placing an officeholder in charge of the key process who must consider the interests of all creditors (the Administrator), the legislation takes English insolvency law full circle back to the Henrician statute that introduced collectivisation and the notion of pari passu distribution. It is the principle and policy behind the latter of these two concepts, equality of treatment, that has re-emerged in the new regime, not the principle of distribution itself. This utilitarian approach to English insolvency law's treatment of creditors returns us to a Tudor orthodoxy. If this "all creditor" benefit outcome is adopted by all stakeholders then future practice will see the emergence of stand-alone, fully consensual, Part I (i.e. no moratorium) CVAs (hereafter referred to as consensual CVAs).
Keywords: company voluntary arrangements, cva, consensus, insolvency act, schemes of arrangement, rescue, restructure, cork, bankruptcy, company, reorganisation
JEL Classification: K00
Suggested Citation: Suggested Citation