Company Voluntary Arrangements (CVAs) - Law - CVA with a moratorium - Ineligibility
Schedule A1 - Insolvency Act 1986 - Paragraph 4C - Liabilities under large value arrangements
Paragraph 4C of Schedule A1 to The Insolvency Act 1986 makes a company ineligible to apply for a Company Voluntary Arrangement (CVA) with a moratorium if it has a liability under an "agreement" of £10 million or more. The definition of the word "agreement" in this context is found at Paragraph 4D (3) of Schedule A1. So if a company has a big particular liability it cannot propose a CVA with a moratorium. For free advice on alternative processes please contact us.
The actual wording of Paragraph 4C of Schedule A1 to The Insolvency Act 1986 is reproduced below in bold.
Paragraph 4C - Schedule A1 - Insolvency Act 1986 - Liability under an arrangement
(1) A company is also excluded from being eligible for a moratorium if, on the date of filing, it has incurred a liability under an agreement of £10 million or more.
(2) Where the liability in sub-paragraph (1) is a contingent liability under or by virtue of a guarantee or an indemnity or security provided on behalf of another person, the amount of that liability is the full amount of the liability in relation to which the guarantee, indemnity or security is provided.
(3) In this paragraph—
(a) the reference to “liability” includes a present or future liability whether, in either case, it is certain or contingent,
(b) the reference to “liability” includes a reference to a liability to be paid wholly or partly in foreign currency (in which case the sterling equivalent shall be calculated as at the time when the liability is incurred).
The law (set out at Paragraph 4C of Schedule A1) prescribes that not all companies can apply for a Company Voluntary Arrangement with a moratorium. One such ineligible type of company is one which has entered into an contract or other sort of agreement of £10 million or more. For free advice on alternative ways forward please contact us & we will be pleased to give free advice.