This note addresses the changes to CVA's in the Rules.
Consolidation of the Rules
Rule 2.1 to 2.45 are applicable to CVA's (they were formerly found between 1.1 to 1.55 of the Insolvency Rules 1986 ("IR86")). There has been an element of consolidation of IR86 applicable to CVA's and relating to:
- Consideration of the CVA Proposal, now found at Rules 2.25 to 2.27 (formerly at 1.9,1.11, 1.48 of IR86).
- Members' Voting Rights, now found at Rule 2.35 (formerly at 1.20,1.53 of IR86).
- Requisite Majority of Members, now found at Rule 2.36 (formerly 1.20 and 1.53 of IR86).
- Hand-over of Property to the Supervisor, now found at Rule 2.39 (formerly 1.23 and 1.54 of IR86).
In summary, the consolidation of the above rules has not resulted in material changes to the substantive and procedural provisions relating to CVA's.
Certain new provisions relating to CVA's have been inserted into the Insolvency Rules 2016 relating to: (i) Creditors' approval of modified proposals; and (ii) the requisition of physical meeting by Creditors. Addressing each addition in the Insolvency Rules 2016.
Modified Proposals in CVA Moratorium's
The provisions relating to the "decision procedure" in the Rules initially prohibits the holding of a physical meeting for CVA's (as a 'decision' can be reached by either correspondence, electronic voting or a virtual meeting). However, if a physical meeting is to be held (because it is requested by a quorum of creditors), Rule 2.29 may apply. Rule 2.29 provides that if a creditors' decision to approve or reject a modified proposal is sought by the company's directors (following the Nominee's receipt of the proposed modifications("Notice")), the following is relevant, namely; (i) a decision must be sought by the decision procedure within 14 days of the date on which the directors gave the Notice; and (ii) the creditors must be given 7 days' notice of the decision date.
This new provision provides for the directors to give notice of the CVA's proposed modifications 7 days before the meeting summoned to consider the implementation of a CVA (with a moratorium). The amendments incorporated into the Rules appear to contemplate the 'decision' making procedure in the Insolvency Rules 2016 which must be sought within 14 days of the Notice.
Requisition of Physical Meetings
Rule 2.31 provides that if creditors requisition a physical meeting to consider a proposal (with or without modifications): (i) the meeting must take place within 14 days of the date on which the prescribed proportion of the creditors have required the meeting to take place; and (ii) notice of at least 7 days is required for the physical meeting. In our view, such meetings will be convened if the creditors wish to further examine or challenge the decision of the Nominee and will need to take place subject to proper notice being provided to creditors