What happens at a Company Voluntary Arrangement Creditors Meeting?
Rules applying under Section 1A Insolvency Act 1986
The procedure for approving a CVA either with or without a moratorium is largely similar.
A decision procedure is requisitioned (usually a virtual meeting of creditors) at which the company’s proposals will be considered by creditors.
Creditors can attend and vote on the proposal document remotely in person or by giving their "proxy" to another person to vote in the way that they wish.
The creditors meeting has to take place within 28 days of the company voluntary arrangement proposal being first filed into court.
If a moratorium has been applied for it is possible for the creditors to extend the period of the moratorium obtained by up to two months. To obtain such an extension a resolution must be passed which is approved by a majority of three quarters in value of those creditors present personally or by proxy and voting at the decision procedure.
The creditors might ultimately approve the proposal with or without any modifications or might reject that which has been proposed.
If the Company Voluntary Arrangement proposal is rejected at the creditors meeting make sure that your Licensed Insolvency Practitioner has previously discussed with you a "Plan B".
There are two separate votes at the decision procedure at which the creditors decide to approve, modify or reject the proposed Company Voluntary Arrangement.
On the first vote all unsecured creditors including connected creditors (such as relatives, business partners etc) can vote. For this resolution to be approved 75% in value, of those voting must be in favour.
Assuming that first hurdle is met there is a second vote. On the second vote connected creditors are not allowed to participate. For this second vote to be carried 50% in value of those unconnected creditors then voting must be in favour.
The parties who can participate in any vote to adjourn the creditors meeting to a later date are, however, quite different. For such a resolution secured creditors can vote for the full amount they are owed (in other words the value of their security is ignored).
If you would like further information on Company Voluntary Arrangements (“CVAs”) with or without a moratorium, please contact Chris Parkman of Purnells on 01326 340579 or by emailing firstname.lastname@example.org.