Rule 1.6 of The Insolvency Rules 1986 - Company Voluntary Arrangements (CVAs)

Additional disclosure for assistance of Nominee - Powers of the nominee in a CVA

 

 

An underlying requirement of the Insolvency Rules 1986 is that full disclosure of a company's financial circumstances and other background information must be provided to enable creditors of the company to take a view on the merits, or otherwise, of that particular Company Volunary Arrangement proposal. Rules 1.3 and Rule 1.5 describe what information must be included in a proposal. Rule 1.6 of The Insolvency Rules 1986 however gives power to the nominee to obtain yet further information - to enable the nominee to form an opinion on the proposal and to report his professional opinion to creditors and the court.

 

 

Insolvency Rules 1986 - Rule 1.6 - Additional disclosure for assistance of the nominee (For a CVA proposed by the directors of a company)

 

 

(1) If it appears to the nominee that he cannot properly prepare his report on the basis of information in the directors' proposal and statement of affairs, he may call on the directors to provide him with—

(a) further and better particulars as to the circumstances in which, and the reasons why, the company is insolvent or (as the case may be) threatened with insolvency;

(b) particulars of any previous proposals which have been made in respect of the company under Part I of the Act;

(c) any further information with respect to the company's affairs which the nominee thinks necessary for the purposes of his report.

 

(2) The nominee may call on the directors to inform him, with respect to any person who is, or at any time in the 2 years preceding the notice under Rule 1.4 has been, a director or officer of the company, whether and in what circumstances (in those 2 years or previously) that person—

(a) has been concerned in the affairs of any other company (whether or not incorporated in England and Wales) which has become insolvent, or

(b) has himself been adjudged bankrupt or entered into an arrangement with his creditors.

 

(3) For the purpose of enabling the nominee to consider their proposal and prepare his report on it, the directors must give [the nominee such access to the company's accounts and records as the nominee may require].

 

 

From the above it is apparent that a nominee has legal power to require the directors of a company who wish to put forward a CVA proposal creditors to give more information to the nominee (than that already disclosed in the proposal and the statement of affairs).  A nominee may require more information under Insolvency Rule 1.6 to derive a more rounded opinion on the Company Voluntary Arrangement proposal.