Rule 1.44 of The Insolvency Rules 1986 - Company Voluntary Arrangements (CVAs) with a Moratorium

Withdrawal of the Nominee's Consent to Act in connection with the CVA

 

The insolvency practitioner who acts in connection with a proposed Company Voluntary Arrangement (CVA) proposal ahead of the creditors meeting to consider the proposal is called the "Nominee". Where a moratorium (a freeze on creditors' enforcement actions) has been obtained prior to the creditors meeting that result has been obtained by the Nominee previously expressing his "opinion" to the Court, Registrar of Companies and the creditors that the proposed Company Voluntary Arrangement has a likelihood of being successful. If after the moratorium has been granted the Nominee changes his opinion on the likely efficacy or funding of the proposed CVA he must withdraw his consent to act. As a result of withdrawal of consent to act the Nominee must notify the Court, Registrar of Companies and the creditors of that fact.

 

This withdrawal of consent to act in the proposed Company Voluntary Arrangement (CVA) by the Nominee puts creditors on notice that the freeze on enforcement actions comes to an end as the effect of Paragraph 25 (4) of Schedule A1 to The Insolvency Act 1986, as regards withdrawal of consent, is that the moratorium period immediately comes to an end

 

The actual wording of Insolvency Rule 1.44 is reproduced below in bold.

 

Insolvency Rules 1986 - Rule 1.44 - Withdrawal of nominee's consent to act

 

Where the nominee withdraws his consent to act he shall, pursuant to paragraph 25(5) of Schedule A1 to the Act, [as soon as reasonably practicable] give notice of his withdrawal and the reason for withdrawing his consent to act to—

(a) the registrar of companies;

(b) the court;

(c) the company; and

(d) any creditor of the company of whose claim [and address the nominee] is aware. 

 

The insolvency practitioner acting as the Nominee in a proposed CVA where a moratorium has been obtained has a power to ensure that company matters are properly handled by the directors in the freeze period ahead of the creditors meeting. The effect of Insolvency Rule 1.44 is that the moratorium comes to an immediate end if the Nominee withdraws his consent to act in connection with the proposed Company Voluntary Arrangement (CVA)