Company Voluntary Arrangements (CVAs) - Law - CVA with a moratorium
Schedule A1 - Insolvency Act 1986 - Paragraph 27 - Bringing the Nominee to account
It is only reasonable that if a Nominee in a Company Voluntary Arrangement moratorium period does wrong he should be personally responsible and brought to account. That is what Paragraph 27 of Schedule A1 to The Insolvency Act 1986 provides. This provision further emphasises the duties of the insolvency practitioner acting as Nominee in the moratorium period - If his monitoring is not professional and thorough the Nominee leaves himself open to a Court driven claim.
The actual wording of Paragraph 27 of Schedule A1 to The Insolvency Act 1986 is reproduced below in bold.
27. (1) Where there are reasonable grounds for believing that—
(a) as a result of any act, omission or decision of the nominee during the moratorium, the company has suffered loss, but
(b) the company does not intend to pursue any claim it may have against the nominee,
any creditor of the company may apply to the court.
(2) An application under sub-paragraph (1) may be made during the moratorium or after it has ended.
(3) On an application under sub-paragraph (1) the court may—
(a) order the company to pursue any claim against the nominee,
(b) authorise any creditor to pursue such a claim in the name of the company, or
(c) make such other order with respect to such a claim as it thinks fit,
unless the court is satisfied that the act, omission or decision of the nominee was in all the circumstances reasonable.
(4) An order under sub-paragraph (3) may (among other things)—
(a) impose conditions on any authority given to pursue a claim,
(b) direct the company to assist in the pursuit of a claim,
(c) make directions with respect to the distribution of anything received as a result of the pursuit of a claim,
(d) bring the moratorium to an end and make such consequential provision as the court thinks fit.
(5) On an application under sub-paragraph (1) the court shall have regard to the interests of the members and creditors of the company generally.
The Nominee acting in a CVA moratorium period does not operate in a vacuum. He has serious responsibilities to monitor the affairs of the company in that period. If the Nominee makes decisions that causes the company loss in that period then the Nominee may become personally liable (Paragraph 27 of Schedule A1).