companies with a turnover of over £5 million ‘the main factor preventing a more positive outcome was the inability to secure funding’.120

In many cases it is the company’s own bank that has to be persuaded that there is a viable future for the company and generally the IPs guiding the CVA will attempt to secure the bank’s approval for proposals before other creditors are approached. Other sources of funds are also available. The BERR, for instance, sponsors a Small Firms Loan Guarantee scheme which provides a guarantee covering 75 per cent of loans of up to £250,000 with terms of up to ten years. Other financing options include new equity funding and the provision of funds by the firm’s managers.

Short-term funding will generally be sought, as noted, through negotiation with the company’s main lender (usually the bank); through negotiating limited credit periods with major suppliers; or by sale of assets. Negotiating supplier credit periods is, however, a fraught process for directors because such trading or credit may expose them to liabilities for fraudulent or wrongful trading121 and it may involve further dissipation of the assets charged to creditors. Many such steps will in practice have to be carried out with the approval of secured lenders because the spending of money or selling of assets will reduce the security cover of such lenders.

A further option for enhancing funding during a moratorium might be offered by provision for super-priority. The issues surrounding such potential changes have been discussed in chapter 9 and will not be rehearsed here.

Landlords, lessors of tools and utilities suppliers

The rights of peaceable re-entry by landlords have been discussed in chapter 9 and that debate will not be repeated here.122 As for those who lease tools to the company and utilities suppliers, the Insolvency Act 1986 Schedule A1 provisions on the moratorium state that during the

120R3, Ninth Survey of Business Recovery in the UK. See also statement by R3, ‘R3 Calls for Government to Commit to Action on Business Rescue’ (2001), that the ‘most intractable problem in business rescue today is the provision of post-rescue finance’. R3’s Twelfth Survey of Corporate Insolvency in the UK reported (p. 26) that loss of finance was the major cited factor in the failure of companies surveyed.

121Insolvency Act 1986 ss. 213 and 214; see further ch. 16 below.

122On the ability of creditors to use a CVA to force landlords to give up their rights in return for rights under a CVA – and landlords as creditors who do not fall within the class of creditors who are not bound by a CVA – see Thomas v. Ken Thomas Ltd [2006] EWCA Civ 1504 and P. Godfrey, ‘Legal Update’ (2007) Recovery (Spring) 9–11. See also the discussion of landlords, unfair prejudice and the Powerhouse case at pp. 509–12 below.