Rule 1.2 of The Insolvency Rules 1986 - Company Voluntary Arrangements (CVAs)

Preparation of the Proposal (By Directors?) - Who has to prepare the CVA proposal?

 

The law set out in Insolvency Rule 1.2 is that it is the directors who "shall" prepare the Company Voluntary Arrangement  proposal themselves - not the insolvency practitioner who has been instructed in connection with the proposed CVA.

 

In practice,

- It is more usual for the insolvency practitioner concerned to assist the directors in drafting the CVA proposal

- But this Insolvency Rule highlights that it is the Directors who are then ultimately responsible for the content of and finalising the proposal.

This can be seen to be sensible as the nominee has to independently "report" on the CVA proposal - and how could he make such a report if the proposal was all his own work?

 

The actual wording of Insolvency Rule 1.2 is shown below in bold.

 

1.2 Preparation of proposal

 

The directors shall prepare for the intended nominee a proposal on which (with or without amendments to be made under Rule 1.3 ) to make his report to the court under section 2.

 

If you are a director of a company and wish to propose a Company Voluntary Arrangement your instructed insolvency practitioner may draft the CVA proposal for you. It is then your responsibility under Insolvency Rule 1.2 to critically review the CVA proposal document for accuracy and completeness.