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

Schedule A1 - Insolvency Act 1986 - Paragraph 4F - Further definition of "capital market investment"

 

 

 

The law prescribes that certain companies are not eligible, if they become insolvent, to apply for a Company Voluntary Arrangement (CVA) with a moratorium. One such type of ineligible company is one involved in "capital market investments".  The phrase "capital market investments" is defined in Paragraph 4E of Schedule A1 but an additional and expanded definition is given in this Paragraph 4F of Schedule A1 to The Insolvency Act 1986. Essentially under this definition a capital market investment is involved in dealing with bonds or commercial paper.

 

The actual wording of Paragraph 4F is reproduced below in bold.

 

 

Paragraph 4F - Schedule A1 - Insolvency Act 1986 - Bonds & Commercial Paper

 

(1) For the purposes of paragraphs 4A and 4D an investment is also a capital market investment if it consists of a bond or commercial paper issued to one or more of the following—

(a) an investment professional within the meaning of article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001,

(b) a person who is, when the agreement mentioned in paragraph 4A is entered into, a certified high net worth individual in relation to a communication within the meaning of article 48(2) of that order,

(c) a person to whom article 49(2) of that order applies (high net worth company, &c.),

(d) a person who is, when the agreement mentioned in paragraph 4A is entered into, a certified sophisticated investor in relation to a communication within the meaning of article 50(1) of that order, and

(e) a person in a State other than the United Kingdom who under the law of that State is not prohibited from investing in bonds or commercial paper.

(2) For the purposes of sub-paragraph (1)—

(a) in applying article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 for the purposes of sub-paragraph (1)(a)—

(i) in article 19(5)(b), ignore the words after “exempt person”,

(ii) in article 19(5)(c)(i), for the words from “the controlled activity” to the end substitute “a controlled activity", and

(iii) in article 19(5)(e) ignore the words from “where the communication” to the end, and

(b) in applying article 49(2) of that order for the purposes of sub-paragraph (1)(c), ignore article 49(2) (e).

(3) In sub-paragraph (1)—

“bond” shall be construed in accordance with article 77 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), and

“commercial paper” has the meaning given by article 9(3) of that order.

 

 

If your company becomes insolvent and is involved in the issuance of bonds or commercial paper it is unlikely that a Company Voluntary Arrangement (CVA) with a moratorium will be available because of the provisions of Paragraph 4E of Schedule A1 to The Insolvency Act 1986. For free advice on how to restructure your company through the use of a different insolvency vehicle please contact us.