Lexis®PSL announces Scottish R3 standard form coronavirus (COVID-19) CVA proposal and standard conditions

Lexis®PSL announces Scottish R3 standard form coronavirus (COVID-19) CVA proposal and standard conditions

R3’s standard form coronavirus CVA proposal (Scotland)

R3 said it was impossible to create a template CVA to tackle all variations that may be necessary in a CVA. R3’s standard form CVA proposal has therefore been drafted to fit the following criteria:

  •  a directors’ proposal—the vast majority of CVAs are proposed by a company’s directors and so R3’s standard form CVA proposal is drafted for this situation, rather than for proposals made by an administrator or liquidator
  • a delayed payment in full—R3’s standard form CVA proposal provides for a breathing space period followed by a delayed payment of 100% of the company’s debts. It is designed for use by companies whose businesses have been hit by coronavirus and which need some time to get their businesses fully operational. Creditors with pre-CVA debts are consequently prevented from enforcing their debts against the company while the CVA is in operation. Trading costs incurred during the CVA are to be paid out of new trading income. Continuation of the business will permit regular contributions to be made to the supervisor out of operational cash flow

R3’s standard form CVA proposal is supported by standard conditions. These are based to a large extent on the popular and well-used R3 standard conditions for individual voluntary arrangements used by consumers, with amendments appropriate for companies. They are incorporated into R3’s standard form CVA proposal by inclusion in Appendix 1.

The creation of R3’s standard form CVA proposal and standard conditions was orchestrated by Stewart Perry and Professor Peter Walton, both members of R3’s General Technical Committee, with assistance from Matthew Finnie, Roddy Mckellar, Sophia Harrison and Tim Cooper on the Scottish versions. Both documents are a free resource available on R3’s website (as well as on Lexis®PSL Restructuring & Insolvency). Variations for use in Northern Ireland will follow in due course.

 Lexis®PSL’s new Scottish CVA precedents

Lexis®PSL Restructuring & Insolvency has launched new Scottish CVA precedents (reproduced with kind permission of R3):

  

Other useful links

R3’s documents are available here.

R3 had previously published a similar CVA proposal and standard conditions for use by English and Welsh companies—see News Analysis: R3 announces new standard form COVID-19 CVA proposal and standard conditions and the following Precedents:

 


 

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.