Company Voluntary Arrangements (CVAs) - Law - CVA with a moratorium

Sch A1 - Insolvency Act 1986 - Para 24 - Monitoring of company's activities by the Nominee in the Moratorium period




If we return to the idea that a moratorium period (freeze on creditors enforcement actions to recover money in that period) is a privilege to a Company that has put forward a Company Voluntary Arrangement (CVA) proposal for consideration by its creditors then it is apparent that that privilege must not be abused. In consequence the law set out in Paragraph 24 of Schedule A1 to The Insolvency Act 1986 provides that the financial affairs of the company must be monitored by an independent person (the Nominee) in the moratorium period. 


The actual wording of Paragraph 24 of Schedule A1 to The Insolvency Act 1986 is reproduced below in bold.


24. (1) During a moratorium, the nominee shall monitor the company’s affairs for the purpose of forming an opinion as to whether—

(a) the proposed voluntary arrangement or, if he has received notice of proposed modifications under paragraph 31(7), the proposed arrangement with those modifications has a reasonable prospect of being approved and implemented, and

(b) the company is likely to have sufficient funds available to it during the remainder of the moratorium to enable it to continue to carry on its business.

(2) The directors shall submit to the nominee any information necessary to enable him to comply with sub-paragraph (1) which he requests from them.

(3) In forming his opinion on the matters mentioned in sub-paragraph (1), the nominee is entitled to rely on the information submitted to him under sub-paragraph (2) unless he has reason to doubt its accuracy.

(4) The reference in sub-paragraph (1)(b) to the company’s business is to that business as the company proposes to carry it on during the remainder of the moratorium.




If through that monitoring (under Paragraph 24 of Schedule A1) the nominee draws the opinion that the proposed CVA does not have a reasonable prospect of success or the moratorium period cannot be funded the Nominee (an insolvency practitioner) should, by law, pull the plug on the moratorium in accordance with Paragraph 25 of the same Schedule.