Rule 1.49 of The Insolvency Rules 1986 - Company Voluntary Arrangements (CVAs) with a Moratorium
The Rule as to an Individual Creditors Entitlement to Vote at a CVA creditors meeting
A creditors meeting is called for creditors to vote on whether or not they wish to approve (or reject or modify) a Company Voluntary Arrangement (CVA) proposal that is put to them. Insolvency Rule 1.49 addresses the questions:
- Which individual creditors can vote at a CVA creditors meeting?
- Is the vote at the Company Voluntary Arrangement creditors meeting for an indvidual creditor calculated on the value of his claim?
- How much can an individual creditor vote for at a CVA Creditors meeting if his claim has not been properly established (called an "unliquidated claim")?
- Is the value of the creditors vote determined as at the date of the CVA creditors meeting or as at the date the moratorium was obtained?
The effect of Insolvency Rule 1.49 is that those individual creditors who are owed the most have the greatest influence on the outcome of the CVA creditors' meeting.
The actual wording of Insolvency Rule 1.49 is reproduced below in bold.
The Insolvency Rules 1986 - Rule 1.49 - Entitlement to vote (creditors) (In a CVA case where there has been a prior moratorium obtained)
(1) Subject as follows, every creditor who has notice of the creditors' meeting is entitled to vote at the meeting or any adjournment of it.
(2) Votes are calculated according to the amount of the creditor's debt as at the beginning of the moratorium, after deducting any amounts paid in respect of that debt after that date.
(3) A creditor may vote in respect of a debt for an unliquidated amount or any debt whose value is not ascertained and for the purposes of voting (but not otherwise) his debt shall be valued at £1 unless the chairman agrees to put a higher value on it.
There have been several legal cases interpreting Insolvency Rule 1.49 particularly in relation to the above paragraph (2). The gist of what the court has effectively ordered is that if the value of a creditors claim is different at the date of the creditors meeting to what it was at the beginnining of the moratorium period then it is the earlier figure that prevails. If you want free advice on your particular circumstances concerning voting at CVA creditors meeting or any any other insolvency please contact us.