Rule 1.23 of The Insolvency Rules 1986 - Company Voluntary Arrangements (CVAs)
Hand-over of property to supervisor - Protection of the previous liquidator's or administrator's fees / remuneration
When a liquidation or administration is followed by an approved Company Voluntary Arrangement (CVA) then Insolvency Rule 1.23 provides the rules for,
- Protecting payment of the former liquidator's or administrator's fees, remuneration & expenses, and
- The hand over of the assets to the Supervisor that were previously included in the liquidation or administration, but which now, under the CVA terms, must fall into the CVA under the control of the Supervisor.
The actual wording of Rule 1.23 is reproduced below in bold.
Insolvency Rules 1986 - Chapter 5 - Rule 1.23 - Hand over of property to Supervisor
(1) After the approval of the voluntary arrangement—
(a) the directors, or
(b) where the company is in liquidation or [in administration], and a person other than the responsible insolvency practitioner is appointed as supervisor of the voluntary arrangement, the insolvency practitioner,
shall [as soon as reasonably practicable] do all that is required for putting the supervisor into possession of the assets included in the arrangement.
(2) Where the company is in liquidation or is [in administration], the supervisor shall on taking possession of the assets discharge any balance due to the insolvency practitioner by way of remuneration or on account of—
(a) fees, costs, charges and expenses properly incurred and payable under the Act or the Rules, and
(b) any advances made in respect of the company, together with interest on such advances at the rate specified in section 17 of the Judgments Act 1838 at the date on which the company went into liquidation or (as the case may be) [entered administration]
(3) Alternatively, the supervisor must, before taking possession, give the responsible insolvency practitioner a written undertaking to discharge any such balance out of the first realisation of assets.
(4) The insolvency practitioner has a charge on the assets included in the voluntary arrangement in respect of any sums due as above until they have been discharged, subject only to the deduction from realisations by the supervisor of the proper costs and expenses of such realisations.
(5) The supervisor shall from time to time out of the realisation of assets discharge all guarantees properly given by the responsible insolvency practitioner for the benefit of the company, and shall pay all the insolvency practitioner's expenses.
(6) References in this Rule to the responsible insolvency practitioner include, where a company is being wound up by the court, the official receiver, whether or not in his capacity as liquidator; and any sums due to the official receiver take priority over those due to a liquidator.
To avoid arguments between insolvency practitioners as to the priority of (and payment of) fees earned by liquidators or administrators and then as to the net sum that must then be handed over to the supervisor of an approved Company Voluntary Arrangement (CVA) Insolvency Rule 1.23 applies.