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CVA Advice For Landlords

10th June, 2021
Keith Steven

Written ByKeith Steven

Managing Director

07879 555349

Keith is the author of the content on this comprehensive rescue, turnaround and insolvency website. He is the managing director of KSA Group Ltd - a specialist firm of turnaround and licensed insolvency practitioners. Keith was nominated for Turnaround Practitioner of the Year 2014 at the National Insolvency and Rescue Awards in 2014.

Keith Steven
  • Landlord affected by CVA – Should I Vote For Or Against? Should I Even Vote?

Landlord affected by CVA – Should I Vote For Or Against? Should I Even Vote?

High street names, once bastions of the High Street are using company voluntary arrangements to restructure their leases, to cut costs during the pandemic. But is this fair? Should I vote? These are just some of the questions we are being asked daily as CVA experts. Keith Steven has experience of dealing with over 500 CVA cases in 23 years, so he knows a thing or two about turnaround. We asked him to answer these frequently asked questions…..

CVA Debate on the 7th November reviewed

Q1 As a landlord should we vote? 

You are not obliged to vote as a creditor in a company voluntary arrangement. The CVA voting process is entirely optional. However, I believe it is important for all creditors and stakeholders to take part in what is an equitable process set out by the 1986 Insolvency Act. Yes, CVAs have been part of UK law since 1986.

If you don’t vote at all, then your vote will be deemed to be in support of the CVA because it is not a vote against.  Is that the impression you want to give as a landlord? By abstaining you don’t really influence the vote against.

So, we would always recommend carefully reading the proposals put forward to you by the CVA nominee and question the nominees or indeed the company proposing the CVA on the terms of the CVA proposals. Not many creditors are aware that they can put forward modifications to change the proposal.

If for example a CVA does not include an element of your debt, you can modify the CVA by proposing modifications. For this to have any bearing on the CVA decision making process you would have to have more than 25% of the overall votes cast.

Question 2: As landlords should we vote for or against a CVA put forward by the tenant?

That is a decision to be made on a purely commercial basis. It may depend on the proposal’s terms to deal with YOUR property and the properties and unsecured debts of other stakeholders. At this moment in time many ‘High Street’ CVAs are predicated on dealing only with the landlords’ leases for their so called dark stress (failing outlets).  My view is it is not equitable to pick on one constituency for the purpose of closing stores. But this is for you, your board and perhaps investors/lenders to consider carefully.

In our view, normal CVA arrangements should include most if not all unsecured debts that the company has at ‘the line in the sand’. Remember secured debt stands outside the scheme but can influence it(**).  The benefit of this for the company is it reorganises its current liabilities, excluding secured debt, in exchange for an offer to repay a dividend over a period of years or a one-off payment. We call this the X dividend over Y years approach.

By excluding debts such as non-domestic rates, employees’ debts, contingent liabilities, supply-side creditors and other short-term debt from the CVA, the company does not get the full benefit of the scheme. More importantly – in the case of Toys R’Us –  HMRC brought the CVA scheme down for £15m of unpaid taxes, which were excluded from the CVA. Toys R’Us is no more on the UK retail scene.

Q3: If I vote against what happens?

This is an equitable process, if 75% or more of the eligible votes are cast in favour then the CVA is approved.  If the vote falls short of that, the CVA is not approved and the company may go into administration or liquidation. Your vote may allow the CVA to be approved but your property agreement, lease or licence may be terminated by the CVA’s failure.

Q4; If we vote in favour of the CVA what happens?

As above the process requires votes to be cast either in favour, against or in favour with modifications. Your vote may allow the CVA to be approved but your property agreement, lease or licence may be compromised, or the rent reduced as set out in the CVA proposals.

Q5: We are not sure what the CVA proposal we have received means for our property, can you assist?

Our insolvency practitioners, directors and regional managers are happy to give general guidance on the CVA’s terms and what the proposals may mean for you subject to the normal caveats and client conflict relationships. Do call us on 0800 9700539

Q6: I see there has been recent case law on CVAs.  What is the situation?

Recent case law regarding the New Look and Regis CVAs has not changed the situation much.  Landlords are still treated as a creditor whose contracts have been compromised. That said, in the Regis case an arbitrary blanket discount on their claims of 75% was regarded as unfair. It is likely then that there will fewer cases of large discounts being applied to landlords’ claims for voting purposes and, in turn, that should make it more difficult for companies to impose CVAs on dissenting landlords. It is still possible to discount landlord claims for voting purposes, but the discount must be a reasonable method for estimating a minimum value.

One of the most significant points to come out of judgments in New Look and Regis is that, where lease modifications at the landlords’ expense have the effect of increasing value for the benefit of shareholders, that benefit should be shared with the impaired landlords to avoid unfair prejudice.

What if I want to know more about CVA? Please download our CVA Experts Guide with 120 pages of information here

**Secured creditors can vote for the likely shortfall in their recovery if the company entered liquidation for example. Without relinquishing their valid security. Obviously, ALL secured creditors must be informed about the CVA process and take part in the scheme architecture.

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.  I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork".  It isn't worth the risk.  If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at 

Worried Director What Will Happen To Me After Liquidation?

Notice of Intention To Appoint Administrators

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems. It can be used as part of the pre-pack administration process as well as used to restructure a failing business to avoid its liquidation.

Notice of Intention To Appoint Administrators
Man with umbrella

What Is A Winding Up Petition By HMRC or Other Creditor

A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.

What Is A Winding Up Petition By HMRC or Other Creditor

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