Section 4 of The Insolvency Act 1986 - Company Voluntary Arrangements (CVAs)

Decisions of meetings called to consider a CVA proposal




Section 4 of The Insolvency Act 1986 provides creditors with wide ranging powers when they consider what possible amendments (which in legalese are called "modifications) they may wish to be voted upon in relation to the Company Voluntary Arrangement proposal put forward to them by the directors of the company. In other words the decision of the creditors meeting is not restricted to a yes or no as to what is proposed by the directors. The creditors can put forward their own modifications.

The creditors cannot however propose any modfication which upsets the existing rights of secured and preferential creditors (without the consent of those creditors). The creditors can however vote in  a different insolvency practitioner to act as supervisor of the arrangement.


The actual wording of Section 4 of The Insolvency Act 1986 is shown below in bold.


4. Decisions of meetings

(1) The meetings summoned under section 3 shall decide whether to approve the proposed voluntary arrangement (with or without modifications).

(2) The modifications may include one conferring the functions proposed to be conferred on the nominee on another person qualified to act as an insolvency practitioner [or authorised to act as nominee, in relation to the voluntary arrangement].

But they shall not include any modification by virtue of which the proposal ceases to be a proposal such as is mentioned in section 1.


(3) A meeting so summoned shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security, except with the concurrence of the creditor concerned.

(4) Subject as follows, a meeting so summoned shall not approve any proposal or modification under which  -

(a) any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts, or

(b) a preferential creditor of the company is to be paid an amount in respect of a preferential debt that bears to that debt a smaller proportion than is borne to another preferential debt by the amount that is to be paid in respect of that other debt.

However, the meeting may approve such a proposal or modification with the concurrence of the preferential creditor concerned.


(5) Subject as above, each of the meetings shall be conducted in accordance with the rules.

(6) After the conclusion of either meeting in accordance with the rules, the chairman of the meeting shall report the result of the meeting to the court, and, immediately after reporting to the court, shall give notice of the result of the meeting to such persons as may be prescribed.

(7) References in this section to preferential debts and preferential creditors are to be read in accordance with section 386 in Part XII of this Act.


If you wish to receive free advice on Section 4 of The Insolvency Act 1986; the related case law concerning decisions capable of being made at CVA creditors' meetings; or as to any aspect of the law relating to Company Voluntary Arrangements (CVAs)  then please contact us by submitting the form on the right hand side of this page.