Company Voluntary Arrangements (CVAs) - Law - Extending a CVA with a moratorium
Schedule A1 - Insolvency Act 1986 - Paragraph 32 - How is a CVA moratorium extended?
A Company Voluntary Arrangement (CVA) moratorium is first obtained by filing prescribed documents in court. The moratorium however can be extended by the vote of creditors at a creditors meeting. Paragraph 32 of Schedule A1 sets out that the CVA moratorium may be extended for up to months - and with conditions.
The actual wording of Paragraph 32 of Schedule A1 to The Insolvency Act 986 is reproduced below in bold.
Paragraph 32 - Schedule A1 - The Insolvency Act 1986 - How is a CVA moratorium extended?
(1) Subject to sub-paragraph (2), a meeting summoned under paragraph 29 which resolves that it be adjourned (or further adjourned) may resolve that the moratorium be extended (or further extended), with or without conditions.
(2) The moratorium may not be extended (or further extended) to a day later than the end of the period of two months which begins—
(a) where both meetings summoned under paragraph 29 are first held on the same day, with that day,
(b) in any other case, with the day on which the later of those meetings is first held.
(3) At any meeting where it is proposed to extend (or further extend) the moratorium, before a decision is taken with respect to that proposal, the nominee shall inform the meeting—
(a) of what he has done in order to comply with his duty under paragraph 24 and the cost of his actions for the company, and
(b) of what he intends to do to continue to comply with that duty if the moratorium is extended (or further extended) and the expected cost of his actions for the company.
(4) Where, in accordance with sub-paragraph (3)(b), the nominee informs a meeting of the expected cost of his intended actions, the meeting shall resolve whether or not to approve that expected cost.
(5) If a decision not to approve the expected cost of the nominee’s intended actions has effect under paragraph 36, the moratorium comes to an end.
(6) A meeting may resolve that a moratorium which has been extended (or further extended) be brought to an end before the end of the period of the extension (or further extension).
(7) The Secretary of State may by order increase or reduce the period for the time being specified in sub-paragraph (2)
The insolvency practitioner acting as a Nominee in a CVA moratorium period must give a full report to the creditors meeting if,
- it is proposed that the meeting be adjourned and
- if it is to be also proposed that an extension to the moratorium be approved by the creditors (until the time of a reconvened meeting).
Paragraph 32 of Schedule A1 makes sure that creditors are provided with full and specified information from the Nominee before they vote on whether or not to extend the Company Voluntary Arrangement moratorium period.