Rule 1.38 of The Insolvency Rules 1986 - Company Voluntary Arrangements (CVAs)
The Nominee's Statement in relation to a CVA proposal requesting a moratorium
The process to apply for a freeze on creditors taking any enforcement actions (a moratorium) before a creditors meeting to consider a Company Voluntary Arrangement (CVA) proposal involves a licensed insolvency practitioner, known as the "Nominee", considering the directors' proposal documents before issuing his opinion on that proposal in what is known as the "Nominee's statement".
Insolvency Rule 1.38 requires that the Nominee's Statement must,
- be promptly delivered back to the directors, and
- contain the Nominee's opinion on the CVA proposal, and
- confirm that the Nominee is prepared to act as Supervisor of the proposed arrangement - should the CVA be agreed by the creditors at a later meeting.
The actual wording of Insolvency Rule 1.38 is reproduced below in bold.
Insolvency Rules 1986 - Rule 1.38 - The nominee's statement
(1) The nominee shall submit to the directors the statement required by paragraph 6(2) of Schedule A1 to the Act within 28 days of the submission to him of the document setting out the terms of the proposed voluntary arrangement.
(2) The statement shall have annexed to it—
(a) the nominee's comments on the proposal, unless the statement contains an opinion in the negative on any of the matters referred to in paragraph 6(2)(a) and (b) of Schedule A1 to the Act, in which case he shall instead give his reasons for that opinion, and
(b) where he is willing to act in relation to the proposed arrangement, a statement of his consent to act.
As a result of Rule 1.38 of The Insolvency Rules 1986 a Nominee who acts in a proposal for a CVA with a moratorium must commit himself in what is known as a Nominee's Statement as to his opinion (positive or negative) as to the likelihood of the CVA being likely to meet with the agreement of creditors.