Section 1 Insolvency Act 1986 type of CVA - What are the Directors Duties?

Because there is no "protection period" or "moratorium" in this older (but still current)  type of Company Voluntary Arrangement (CVA) the directors duties and responsibilities are much less than that they face if they were proposing the newer type of CVA. (ie a Section 1A Insolvency Act 1986 type of CVA)

In the older or Section 1 of The Insolvency Act 1986 type of Company Voluntary Arrangement  (CVA) the directors:

• have a duty to prepare the proposal, (although this is most often done on their behalf by the Licenced Insolvency Practioner Nominee).

• have the continuing general and specific duties imposed by the Companies Acts to act in a proper manner. They do not however have additional responsibilities.

By contrast in the newer type of Company Voluntary Arrangement (CVA) [The Section 1A Insolvency Act 1986 arangement] the directors have additional responsibilities placed on them arising out of the provisions initially set out in The Insolvency Act 2000.

This is reasonable because if a "moratorium" is required under a new type CVA the directors must accept:

• that they have greater responsibilities arising from the fact that the company creditors have been deprived of their normal rights of enforcement.

• that they must publicly "disclose" more.

If you wish your company to avoid the impact of a winding up petition or a winding up order or need relief from creditors taking enforcement action then contact us for a FREE INITIAL MEETING. We can then explain the pros and cons of each type of Company Voluntary Arrangement proposal and advise you of still further insolvency options open to your company.