AN INSOLVENCY expert has welcomed moves to help small businesses tackle their debts through the same procedure used by a host of famous names.

Company voluntary arrangements (CVAs) have recently been employed by high street names such as Moss Bros, New Look and Ann Summers in a bid to avoid administration.

The insolvency industry’s professional body R3 has introduced a free standard form aimed at helping small and medium sized enterprises (SMEs) pursue CVAs.

Clive Fortis, at the Bournemouth office of insolvency practitioners Antony Batty & Company, said: “Antony Batty & Company have been one of the leading promoters of CVAs for many years. We hope that the current crisis will make more companies investigate a CVA as a restructuring option and a route to recovery.”

The new “Covid-19 CVAs” are different from “standard” CVAs, mainly because they are based on a 24-month period, with a nine-month payment holiday at the start of the agreement. There is no payment for up to three months until trading starts again, followed by a “breathing space” of up to six months.

The agreements also include the ability to suspend payments during a lockdown and to seek further decisions if more significant changes become necessary.

Unlike CVAs employed by famous names, the arrangements require the company concerned to pay its debts in full.

Mr Fortis said: “We believe these new CVAs should be welcomed as they will help to reduce the cost and time involved in putting a CVA in place for SMEs. CVAs should not be seen as being relevant only to large retail and hospitality groups.

“Last year there were 17,225 corporate insolvencies in England & Wales of which only 351 were CVAs – only two per cent of all corporate insolvencies. Given the current circumstances, we believe that the new Covid CVA will help bring the process into the spotlight and help more companies turn around and survive.

“The R3 CVA is a simple option for financially distressed SME companies although the ‘one size fits all’ approach may prove difficult. However the document should be easy to adjust to particular circumstances.

“It remains the case, of course, that such companies will need to have the support of their secured creditors and have confidence in their ability to return to profitability as and when the Covid crisis subsides.

“Time will tell how whether the R3 Covid CVA proves popular. This will depend to a large extent on business owners’ awareness of this option and fully understanding how they work.”