Purnells

	Two types of CVA
	what are the two types? why two types? who can apply for a new type of CVA? are their different rules? when would an old type CVA be used? when would a new type of CVA be used?
	Old type CVA - No Moratorium the limbo period nominees duties disclosure issues directors duties the proposal impact of proposal on various parties
	New type CVA - With Moratorium enormous power enormous responsibility disclosure issues impact of proposal nominees duties creditors meeting voting rights supervisors duties a typical proposal costs concluding the CVA banks and debenture holders landlords petitioning creditors preferential creditors unsecured creditors
	Table of differences table to show the differences between the two types of CVA?
	Administration Order v CVA when would administration be sought rather than take up a new type CVA?
	Case Studies case study 1 case study 2 case study 3

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There is one major difference regarding who is allowed to vote (and for what sums) at a new type CVA creditors meeting.

For every other type of insolvency process (or liquidation) secured creditors cannot vote - except to the extent that the value of their security does not cover the amount they are owed.

If a resolution is proposed to "adjourn" the creditors meeting then at a new type CVA creditors meetings, secured creditors can vote for the full amount they are owed and the security they hold is ignored for that purpose. This means that:

even if a bank holds a debenture the bank must still be able to vote for the full amount owed.
A hire purchase company will also be able to ignore their security and vote for the full amount they are owed.

This fundamental change to voting rights is quite reasonable when you remember that the moratorium period takes away the rights of debenture holders and banks to take enforcement action. The aim is for secured creditors not to have their enforcement rights taken away when the creditors have not made up their minds - by the time of the first meeting - whether or not they will accept the proposal.

The tactics which secured creditors might adopt at creditors meetings is considered later on this website.

Another interesting change in the voting rules from 1-1-2003 is that an approved arrangement binds not only every person who was entitled to vote at the meeting but also every person who would have been so entitled if they had had notice of the creditors meeting. This means that unknown creditors will be bound by the result of the creditors meeting.