- Creditors are frozen by the Section 1A Company Voluntary Arrangement
- CVA - Responsibility of directors in a Section 1A CVA
- Section 1A Insolvency Act 1986 - Disclosure Requirements
- Creditors not included in the CVA proposal
- What does a Nominee of a Company Voluntary Arrangement have to do?
- CVA Creditors Meeting - Section 1A Insolvency Act 1986
- Voting Rights in a CVA under Section 1A Insolvency Act 1986
- Supervisors Duties in a Section 1A CVA
- A draft Company Voluntary Arrangement Proposal for you to look at
- Costs of preparing and operating under a Company Voluntary Arrangement
- Concluding the Company Voluntary Arrangement - The end is nigh!
- Banks and other secured creditors in a Company Voluntary Arrangement
- Landlords no longer protected from a Company Voluntary Arrangement
- Petitioning Creditors
- Company Voluntary Arrangements and Preferential Creditors - Definition
- Benefits to unsecured Creditors in the newer type of CVA
Voting Rights in a Company Voluntary Arrangement creditors meeting called under Section 1A of The Insolvency Act 1986
There is one major difference regarding who is allowed to vote (and for what sums) at a new type CVA creditors meeting (the type of Company Voluntary Arrangement that provides a legal stop to any creditors enforcement steps in the lead up period to the 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 unsecured 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.
As a company director can you be expected to know the intricacies of all of this detailed insolvency law? It may be better to contact Purnells Licenced Insolvency Practitioners for a FREE INITIAL MEETING. We can together then analyse the creditors of your company, explain the significance of that analysis and identify who needs to be onside (a far as voting is concerned) to get your Company Voluntary Arrangement (CVA) proposal approved.