A “marked increase” in the number of company voluntary arrangements (CVA) being used by struggling businesses, has led to the Pension Protection Fund publishing updated guidance.

In recent months, high profiles retailers such as House of Fraser, Mothercare and Carpetright have all proposed CVAs in an attempt to save the businesses. The PPF said that the majority of CVAs are aimed at addressing issues with a company’s property portfolio, with the intention of leaving creditors, including defined benefit pension schemes, untouched.

However, the PPF highlighted that despite agreeing a CVA with creditors, experience has shown that often the issues facing the businesses remains unaddressed and the employer goes on to fail, with recent examples including BHS and Toys R Us.

In many cases, once a CVA is proposed the PPF is automatically given the pension scheme’s creditor rights, and is entitled to vote on the CVA. The new guidance is aimed at the approach employers and their advisers should take when presenting a CVA proposal to the PPF. It highlights the issues that should be considered so that the PPF can decide whether it is appropriate to vote in favour of the proposal or not.

Commenting on the guidance, PPF director of restructuring and insolvency Malcolm Weir said: “Our role is to protect the 11 million people who belong to a DB pension scheme and our levy payers, therefore, as with any restructuring case, we do not agree to CVAs lightly. The guidance will help to ensure employers can address the areas of concern for the PPF at the outset and make the process more efficient. As ever we welcome early engagement when proposals are made.”

When an employer (or all employers in the case of a last man standing scheme) lodges a CVA proposal in Court, a PPF Assessment Period will commence for the associated scheme(s). From this moment, the trustees’ rights as a creditor are exercised by the PPF.

The PPF Guidance on Company Voluntary Arrangements can be found here.

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