7.4 Implementation and conclusion of CVAs

Question 1

What is the impact on an existing Liq/ administration if a CVA is approved?

Answer 1

If company in liquidation or administration, within 28 days of report of meeting Court may

 stay or sist winding up proceedings
 provide for appointment of administrator to cease to have effect
 make other directions

Question 2

When can a CVA be challenged?

Answer 2

Member’s right to challenge if decision of creditors differs from that taken by members meeting

CVA unfairly prejudices interests of a creditor, member or contributory,

Material irregularity at or in relation to the qualifying decision procedure

Challenge against admission by chair for voting

Challenge of supervisor’s act, decision or omission

Question 3

Where are payments into a CVA deposited?

Answer 3

any established United Kingdom clearing bank or building society

Question 4

When should PODs be requested in a CVA?

Answer 4

ASARP after approval

Question 5

How can CVA be varied?

Answer 5

R3 standard conditions:

Variation of arrangement by decision procedure on 14 days notice
 Same2 -stage majorities as are required for approval of the CVA

 Provision mirror Part15 Rules

Question 6

What if there is a breach?

Answer 6

R3 standard conditions:

Company has 1 month to remedy breach otherwise supervisor has discretion to either:

 Issue notice of termination and present a petition for winding-up; or

 Seek a decision of creditors whether to do so and/or vary the CVA

Question 7

When can nominee withdraw consent to act?

Answer 7

Prior to approval of CVA, the nominee withdraws consent to act having concluded:

 CVA does not have a reasonable prospect of being approved and implemented

 The CVA should not be considered by creditors

 The directors have failed to provide information requested from them

Question 8

When can the court terminate a CVA?

Answer 8

 CVA may be terminated by order of court on basis

 CVA unfairl yprejudices any creditor, member or contributory, or

 Material irregularity at or in relation to the decision procedure

Challenge window limited to 28 days

Copy of court order sent to Registrar

Question 9

When can the supervisor petition to place co in liquidation? (statutory power)

Answer 9

Where no prospect for the survival of the company (or its business)

 S140IA86–court may appoint the supervisor as liquidator

 No specific provisions the continuance of a creditors’ committee

 Date for claims is date of liquidation, not date of CVA

Question 10

What happens to company assets when a CVA ends?

Answer 10

Depends on the terms of the proposal

 NT Gallagher: A trust will continue over the assets that were in the arrangement unless
arrangement expressly provides to the contrary

R3 Standard Conditions approach:

 Assets other than excluded assets held on trust = supervisor to realise assets
 Trust continues if arrangement expires or fails = supervisor distributes to creditors

 Trust ends if full implementation = trust assets returned to company

 Trust over unrealised assets terminates if winding - up order made

 Supervisor distributes assets in hand to arrangement creditors

 Liquidator would deal with any unrealised assets

 i.e. If a CVA fails, the company doesn’t necessarily get its assets back and the supervisor’s job is not necessarily complete

 Check terms of CVA for any continuing trust