IVA Guide & Explanations
Company Voluntary Arrangement (CVA)
A company voluntary arrangement (CVA) can allow your company to continue in business despite debts and insolvency. The Debt Counsellors can advise on business debt and company voluntary arrangements.
Get free advice on the company voluntary arrangement call 07721 565802 A company voluntary arrangement is used to rescue companies which are insolvent yet have an underlying business that would be profitable in the future without having old debts holding it back.
A proposal is drawn up by the directors or if the company is in liquidation or administration the liquidator or administrator. The proposal must name an Insolvency Practitioner who will act as nominee and will call meetings of the members and creditors. The nominee also reports to the court on whether in his opinion a meeting of members and creditors should be called to enable them to consider the proposal.
The proposal takes effect and is binding on all creditors who had notice and were entitled to vote at the meeting if it is accepted by a majority of the members and in excess of 75% in value of creditors present and voting.
A supervisor is appointed at the meeting of creditors to administer the arrangement. His duties and powers will be set out in the voluntary arrangement.
An administration order is made by a court on the petition of the company, the directors or a creditor to appoint an Administrator to manage the affairs, business and property of the company for the duration of the order. The administration is sought for any of the following purposes:
The survival of the company and the whole or any part of its undertaking as going concern.
The approval of a voluntary arrangement.
The sanctioning of under CA 1985, S425 of a compromise or arrangement between the company and any such persons as are mentioned in that section.
A more advantageous realisation of the company assets than would be effected on a winding-up.
Administration will take the pressure of the creditors off the company to give it time to work out a scheme to pay creditors.
During the period in which an administrative order is in force:
No resolution may be passed or order made for the winding-up of the company. No administrative receiver of the company may be appointed.
No other steps may be taken to enforce any security over the company’s property , or to repossess goods in the company’s possession under any hire-purchase agreement, except with the consent of the administrator or the leave of the Court.
No other proceedings and no execution or other legal process may be commenced or continued and no distress be levied against the company or its property except with the consent of the administrator or the leave of the Court.
Administration is a costly procedure as it involves the costs of an Insolvency Practitioner and Solicitor at the commencement of the procedure and during the course of the Administration, and of course the supervision of the court.
If you are worried about your business debt and the prospect of receivership, The Debt Counsellors can help you with valuable information and advice.
There are three types of receivership:
An Administrative receiver who is appointed by a debenture holder under a fixed or floating charge debenture.
A Law of property Act receiver who is appointed over property under The Law of Property Act 1925.
A Receiver appointed by the Court. ( This is rarely used in practice)
An administrative Receiver is appointed over specific assets of a company by a creditor who has a debenture or a charge over those assets and the company has defaulted on the debenture agreement. The receiver is appointed by the creditor applying to the court for his appointment. The receiver will realise the assets which his debenture covers and account to the debenture holder for these funds after deducting his fees. Any balance of funds is returned to the company. An administrative receiver must be an insolvency practitioner.
Law of Property Act Receivership (LPA)
An LPA receiver is appointed by a lender who has a fixed charge over the property under the statutory power given in section 109 Law of Property Act 1925. The powers of the LPA receiver are as follows:
- To demand and recover rent to give receipts for income.
- To insure any property against loss or damage.
- To grant a lease over the property at the best reasonably obtained rent.
- To accept a surrender of a lease in order to grant a new lease.
In a well drafted mortgage the above powers are extended and would allow the receiver to take control of the property and act as he considers fit with the consent of the mortgagee.
Court Appointed Receiver
In certain circumstances the court may appoint a receiver to execute a judgement or to protect property which is subject to a dispute. The receiver appointed by the court must comply with the order of the court in which his powers and duties will be defined. A court appointed receiver is an officer of the court and not an agent of the company or a creditor and will be personally liable on contracts entered into in the execution of his
Personal Insolvency – bankruptcy
Personal insolvency and bankruptcy are growing problems in the UK.
Get confidential advice on personal insolvency and bankruptcy call 07721 565802.
If you are worried about your debt and concerned about insolvency or bankruptcy, talk to The Debt Counsellors – we provide debt advice for free and in confidence. We can advise you on serious debt and can help with information and advice on insolvency and bankruptcy.
Who may present a bankruptcy petition:
- A creditor individually or jointly (who is owed 750 pounds or more).
- The debtor.
- The Supervisor of a debtor’s Individual Voluntary Arrangement.
- The Official Petitioner where a criminal bankruptcy has been made.
- Grounds of creditors’ petition
- The debt is above the bankruptcy level of 750 pounds.
- The debt is for a liquidated sum payable to the creditor immediately or at some certain time in the future and is unsecured.
- The debtor appears either to be unable to pay his debt or has no reasonable prospects of doing so.
- There is no outstanding application to set aside a statutory demand.
The official receiver is appointed to act as trustee from the date of the bankruptcy order until a trustee takes control. The Official Receiver will decide whether to call a creditors’ meeting or appoint an insolvency practitioner to act as trustee of the bankrupt estate. The trustee in bankruptcy is appointed for the purpose of getting in, realising and distributing the bankrupt’s estate. The official receiver will investigate the financial affairs of the debtor for the period before bankruptcy.
Restrictions on a bankrupt
- Obtaining credit of 250 pounds or more without disclosing he is a bankrupt.
- Carrying on a business in a different name from that which the bankruptcy was made without informing all people doing business with the debtor.
- Acting as a director of a company or concerned (directly or indirectly) in promoting, forming or managing a company without the Court’s consent.
- A bankrupt may not hold certain public offices.
- Bankruptcy Offences
- Concealment of property.
- Concealment of books and papers.
- False statements.
- Fraudulent disposal of property.
- Fraudulent dealing with property obtained on credit.
- Failure to keep proper accounts of business.
Definitions … Individual Voluntary Arrangement
An Individual Voluntary Arrangement is an alternative to bankruptcy, a flexible procedure where a debtor makes an offer to his creditors, which they accept, amend or reject.
A proposal is drafted by the debtor with the assistance of The Debt Counsellors, setting out the debtors circumstances, assets and liabilities, and the manner in which he/she proposes to deal with his creditors.
When the proposal is complete an application for an interim order is made by lodging the documents with the Court having bankruptcy jurisdiction in respect of the debtor. This will result in the issuing of an Interim Order which prohibits the commencement or continuation of any legal process against the debtor or his estate until the Nominee considers the proposal to be both realistic and workable.
The Nominee (A Licensed Insolvency Practitioner) will file a report into court which indicates if in his opinion a creditors meeting should be called. The Nominee then circulates all the debtors and creditors with the proposal.
At the creditors meeting, a vote is held to decide on whether or not to accept the proposal. Seventy five percent (75%) in value of the creditors who are present or represented must vote for the proposal for it to be accepted.
The Supervisor appointed at the creditors meeting then proceeds to administrate the proposal.
The benefits of an Individual Voluntary Arrangement:
- Avoids the stigma of bankruptcy.
- You avoid being disqualified from acting as a director.
- Certain employment’s require the debtor to be financially “responsible” and certain professions consider that bankruptcy automatically disbars the individual from acting as a qualified person of that profession.
- A Voluntary arrangement reflects favourably on an individual’s financial responsibility by endeavouring to maximise the return to the creditors.
What is an Individual Voluntary Arrangement ?
The answer is simply:
Whatever is agreed between the debtor and his creditors at the creditors’ meeting (75% majority).
Definitions … Informal Schemes – Private Individuals & Partnerships
Insolvent persons may come to arrangements with Creditors outside the statutory recognised procedures. Such schemes suffer from the fact that they are not widely understood, and can be upset by the precipitate action of one Creditor.
The main types are moratoriums and informal compositions
A moratorium is a freezing of debts. It is an informal arrangement between a Debtor and his/her Creditors, designed to give the Debtor breathing space to put his/her affairs in order. Its main purpose should be to see that ultimately the creditors get paid in full.
The main features are as follows:
A meeting of Creditors should be held, at which a Statement of Affairs is presented, the reasons for the Debtors difficulties explained, and the proposals outlined.
Provision should be made for preferential Creditors to be paid in full.
A Committee of Creditors should be formed to supervise the Debtors affairs during the moratorium, if Creditors wish to appoint same.
A phased programme for the repayment of the debts should be set out.
Each creditor should sign a document agreeing to defer action for the recovery of their debt.
If the bank account is overdrawn, a new account at a new bank should be opened.
An informal composition can take many forms. The term embraces any scheme under which Creditors accept less that 100p in the £ in full and final settlement.
Such a scheme will normally only work when the number of Creditors is few and they can be satisfied that the scheme will provide them with a better return than Bankruptcy. A typical ingredient of such a scheme would be the waiving of a large claim by a relative of the Debtor.
Although such schemes are described as ‘informal’, it is advisable for documents to be completed, so that, once accepted, the scheme is binding to all parties.
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