CVAs See Growth In Polularity
A new poll by restructuring lawyers has revealed that Company Voluntary Arrangements or CVAS are becoming more and more popular and should also be more widely used.
The study, carried out by accountancy firm PricewaterhouseCoopers (PwC) revealed that 85% of the restructuring lawyers polled believe that CVAs along with the similar scheme of arrangements, have increased in popularity recently.
Meanwhile, over half of people polled believed that the arrangements should be more widely used as an alternative to formal insolvency proceedings.
The responses have shown that the apparent unpopularity of CVAs, was due to a common belief that they are expensive and take too long to implement. There has also been a belief that they can only be used by larger corporations, due to the cost and complexities in place for smaller businesses.
Mike Jervis, business recovery services partner at PwC, said: “Both schemes and CVAs have an important place in restructurings with CVAs particularly becoming increasingly popular in recent years.
“These alternative restructuring processes have become more widely accepted by a more pragmatic creditor base given the increased financial pressure on companies and the desire to avoid using administration.”
Whilst agreeing that both CVAs and scheme of arrangements should be more widely used, it was also agreed by the poll that CVAs were more suited to sectors such a retail or real estate, whilst schemes of arrangements are more applicable to cases such as financial service businesses and leverage finance companies.
Jervis also added, “CVAs are considered a simpler process than schemes in that they can be quicker to implement in a rescue scenario.
“However, those who have been involved in schemes more readily see them as an appropriate way forward given their inherent flexibility and more consensual process. There is no right answer on whether a scheme or CVA should be pursued and the solution should be determined by the merits of each against the interests of stakeholders.”
Posted at 01:38PM May 13, 2010 by Marc Stenton in Insolvency | Comments[0]
