CVA’s and the Crown’s position

2nd November 2020


The government’s new lockdown lasts until 2 December with Crown Preference returning on 1 December. Although these two factors are not linked, it should be highlighted that businesses in distress will potentially have fewer insolvency options to ensure the survival of the business, in particular CVAs, if they wait until the end of the lockdown to consider those options. 
We previously issued the below article in relation to the impact of Crown Preference on CVAs.
With management information and forecasts provided in advance, a CVA proposal will typically take a week to draft and a further two week’s notice for the meeting of creditors. Consequently, for any business considering a CVA, time is now of the essence.
If you have any clients or contacts for whom a CVA may be required, please do introduce them to one of our four Directors at the earliest opportunity. 

CVA’s and the Crown’s position

HMRC has just issued some helpful guidance on existing and future company voluntary arrangements (CVA’s) in the wake of the current pandemic. This advice can be downloaded from;

We suspect that this advice is a precursor of things to come. Economists are in agreement that corporate insolvencies will increase exponentially in the last quarter of this year and throughout the next, with CVA’s being used as an essential restructuring tool. This guidance is helpful as it indicates more flexibility on behalf of the Crown.

However please bear in mind that HMRC’s position will revert to that of a preferential creditor status (ranking ahead of the trade or unsecured creditors) effective from 1 December 2020, meaning that any CVA’s commencing before this time will benefit from the current creditor priority although, quite interestingly, HMRC are attempting to gain quasi preferential status now in relation to Job Retention Scheme payments and it will be interesting to see how this issue evolves.

Bearing in mind the significant Crown debt that is building up in most companies, any CVA’s post 1 December 2020 may not be viable due to the Crowns preferential status.

Please feel free to call any of the team members below to discuss this or any of the other services we provide. Or visit our website for further information

Robert Keyes                     07500 933 022 / [email protected]
Gareth Roberts                  07979 706 392 / [email protected]
Paul Ellison                        07967 471211 / [email protected]
David Taylor                       07855 231 103 / [email protected]