Corporate Insolvency Flashcards
List the options available to individuals facing financial difficulty.
Individuals facing financial difficulty have three options: do nothing, do a deal, or declare bankruptcy.
How does an IVA differ from bankruptcy in terms of creditor binding?
An IVA can bind all creditors except secured creditors, while bankruptcy affects all creditors.
Explain the typical nature of the debt in a creditor’s bankruptcy petition.
The debt is generally unsecured.
What is an Individual Voluntary Arrangement (IVA)?
An Individual Voluntary Arrangement (IVA) is a collective procedure often used as an alternative to bankruptcy, allowing individuals to make arrangements with creditors to pay back debts over time.
Identify the formal insolvency procedures for insolvent individuals.
The two formal insolvency procedures for insolvent individuals are bankruptcy and Individual Voluntary Arrangements (IVAs).
Describe the purpose of an IVA.
An IVA, or Individual Voluntary Arrangement, is a contractual arrangement that allows a debtor to settle their debts by paying a proportion of what they owe to their creditors.
Define the role of an Insolvency Practitioner in an IVA.
An Insolvency Practitioner supervises the debtor’s implementation and compliance with the terms of the IVA.
What is required for an IVA to be binding on creditors?
An IVA becomes binding on creditors if it is approved by the requisite percentage of them.
How long does an IVA typically last?
An IVA can last any length of time, but it commonly lasts between three to five years.
Describe the role of the nominee in the process of setting up an IVA.
The nominee assists the debtor in drafting proposals that outline a statement of their affairs, including full details of assets and liabilities, and submits a report to the court regarding the arrangement’s prospects.
How does a debtor initiate a moratorium during the IVA process?
A debtor can apply to the court for an interim order, which, if granted, imposes a moratorium that freezes existing or proposed bankruptcy proceedings and other legal processes against the debtor.
Define the duration of the interim order in the IVA process.
The interim order (moratorium) lasts for 14 days, but the court has the authority to extend this period.
What is required for the terms of the IVA to be approved by creditors?
Creditors holding more than 75% (by value) of the debt must vote in favor of the terms of the IVA for it to be approved.
What happens if the court grants the interim order during the IVA process?
If granted, the interim order creates a moratorium that prevents any bankruptcy proceedings and legal actions against the debtor without the court’s permission.
What is the purpose of calling a creditors’ meeting in the IVA process?
The creditors’ meeting is called to allow creditors to vote on the approval of the IVA terms proposed by the debtor.
Describe the effect of an approved IVA on the debtor and creditors.
An approved IVA binds the debtor and all of their creditors, except secured creditors unless they consent to the IVA.
Who supervises the implementation of an IVA?
The nominee becomes the supervisor of the IVA and its implementation.
What actions can the supervisor of an IVA take if the debtor fails to comply with its terms?
The supervisor can usually petition for the debtor’s bankruptcy.
List some advantages of an IVA.
Advantages of an IVA include being an alternative to bankruptcy, binding all creditors (except secured creditors), and the availability of a moratorium if an interim order is made.
Identify some disadvantages of an IVA.
Disadvantages of an IVA include potentially lasting longer than bankruptcy and being an expensive process.
Who can bring a bankruptcy petition?
A bankruptcy petition is usually brought by a creditor but may also be made by the debtor.
Define the grounds for a creditor’s bankruptcy petition.
A ground for the petition is that the debtor is unable or has no reasonable prospect to pay its petition debts.
What is the only ground for a debtor’s bankruptcy petition?
The only ground for this petition is that the debtor is unable to pay its debts.
What is the minimum debt amount required for a creditor’s bankruptcy petition?
The debt must be for a liquidated sum exceeding £5,000.