Insolvency Act 1986

Part IE+W+S Company Voluntary Arrangements

The ProposalE+W+S

1 Those who may propose an arrangement.E+W+S

(1)The directors of a company [F1(other than one which is in administration or being wound up)] may make a proposal under this Part to the company and to its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs (from here on referred to, in either case, as a “voluntary arrangement”).

(2)A proposal under this Part is one which provides for some person (“the nominee”) to act in relation to the voluntary arrangement either as trustee or otherwise for the purpose of supervising its implementation; and the nominee must be a person who is qualified to act as an insolvency practitioner [F2or authorised to act as nominee, in relation to the voluntary arrangement].

(3)Such a proposal may also be made—

[F3(a)where the company is in administration, by the administrator,]

(b)where the company is being wound up, by the liquidator.

[F4(4)In this Part “company” means—

(a)a company within the meaning of section 735(1) of the Companies Act 1985,

(b)a company incorporated in an EEA State other than the United Kingdom; or

(c)a company not incorporated in an EEA State but having its centre of main interests in a member State other than Denmark.

(5)In subsection (4), in relation to a company, “centre of main interests” has the same meaning as in the EC Regulation and, in the absence of proof to the contrary, is presumed to be the place of its registered office (within the meaning of that Regulation).

(6)If a company incorporated outside the United Kingdom has a principal place of business in Northern Ireland, no proposal under this Part shall be made in relation to it unless it also has a principal place of business in England and Wales or Scotland (or both in England and Wales or Scotland).]

[F51A Moratorium.E+W+S

(1)Where the directors of an eligible company intend to make a proposal for a voluntary arrangement, they may take steps to obtain a moratorium for the company.

(2)The provisions of Schedule A1 to this Act have effect with respect to—

(a)companies eligible for a moratorium under this section,

(b)the procedure for obtaining such a moratorium,

(c)the effects of such a moratorium, and

(d)the procedure applicable (in place of sections 2 to 6 and 7) in relation to the approval and implementation of a voluntary arrangement where such a moratorium is or has been in force.]

2 Procedure where nominee is not the liquidator or administrator.E+W+S

(1)This section applies where the nominee under section 1 is not the liquidator or administrator of the company [F6and the directors do not propose to take steps to obtain a moratorium under section 1A for the company].

(2)The nominee shall, within 28 days (or such longer period as the court may allow) after he is given notice of the proposal for a voluntary arrangement, submit a report to the court stating—

(a)

[F7whether, in his opinion, the proposed voluntary arrangement has a reasonable prospect of being approved and implemented,

F7(aa)] whether, in his opinion, meetings of the company and of its creditors should be summoned to consider the proposal, and

(b)if in his opinion such meetings should be summoned, the date on which, and time and place at which, he proposes the meetings should be held.

(3)For the purposes of enabling the nominee to prepare his report, the person intending to make the proposal shall submit to the nominee—

(a)a document setting out the terms of the proposed voluntary arrangement, and

(b)a statement of the company’s affairs containing—

(i)such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed, and

(ii)such other information as may be prescribed.

[F8(4)The court may—

(a)on an application made by the person intending to make the proposal, in a case where the nominee has failed to submit the report required by this section or has died, or

(b)on an application made by that person or the nominee, in a case where it is impracticable or inappropriate for the nominee to continue to act as such,

direct that the nominee be replaced as such by another person qualified to act as an insolvency practitioner, or authorised to act as nominee, in relation to the voluntary arrangement.]

3 Summoning of meetings.E+W+S

(1)Where the nominee under section 1 is not the liquidator or administrator, and it has been report to the court that such meetings as are mentioned in section 2(2) should be summoned, the person making the report shall (unless the court otherwise directs) summon those meetings for the time, date and place proposed in the report.

(2)Where the nominee is the liquidator or administrator, he shall summon meetings of the company and of its creditors to consider the proposal for such a time, date and place as he thinks fit.

(3)The persons to be summoned to a creditors’ meeting under this section are every creditor of the company of whose claim and address the person summoning the meeting is aware.

Consideration and implementation of proposalE+W+S

4 Decisions of meetings.E+W+S

(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 [F9or 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.

[F104A Approval of arrangement.E+W+S

(1)This section applies to a decision, under section 4, with respect to the approval of a proposed voluntary arrangement.

(2)The decision has effect if, in accordance with the rules—

(a)it has been taken by both meetings summoned under section 3, or

(b)(subject to any order made under subsection (4)) it has been taken by the creditors’ meeting summoned under that section.

(3)If the decision taken by the creditors’ meeting differs from that taken by the company meeting, a member of the company may apply to the court.

(4)An application under subsection (3) shall not be made after the end of the period of 28 days beginning with—

(a)the day on which the decision was taken by the creditors’ meeting, or

(b)where the decision of the company meeting was taken on a later day, that day.

(5)Where a member of a regulated company, within the meaning given by paragraph 44 of Schedule A1, applies to the court under subsection (3), the Financial Services Authority is entitled to be heard on the application.

(6)On an application under subsection (3), the court may—

(a)order the decision of the company meeting to have effect instead of the decision of the creditors’ meeting, or

(b)make such other order as it thinks fit.]

5 Effect of approval.E+W+S

[F11(1)This section applies where a decision approving a voluntary arrangement has effect under section 4A.]

(2)The F12. . . voluntary arrangement—

(a)takes effect as if made by the company at the creditors’ meeting, and

[F13(b)binds every person who in accordance with the rules—

(i)was entitled to vote at that meeting (whether or not he was present or represented at it), or

(ii)would have been so entitled if he had had notice of it,

as if he were a party to the voluntary arrangement.

(2A)If—

(a)when the arrangement ceases to have effect any amount payable under the arrangement to a person bound by virtue of subsection (2)(b)(ii) has not been paid, and

(b)the arrangement did not come to an end prematurely,

the company shall at that time become liable to pay to that person the amount payable under the arrangement.]

(3)Subject as follows, if the company is being wound up or [F14is in administration], the court may do one or both of the following, namely—

(a)by order stay or sist all proceedings in the winding up or [F14provide for the appointment of the administrator to cease to have effect];

(b)give such directions with respect to the conduct of the winding up or the administration as it thinks appropriate for facilitating the implementation of the F12. . . voluntary arrangement.

(4)The court shall not make an order under subsection (3)(a)—

(a)at any time before the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) has been made to the court, or

(b)at any time when an application under the next section or an appeal in respect of such an application is pending, or at any time in the period within which such an appeal may be brought.

[F15(5)Where the company is in energy administration, the court shall not make an order or give a direction under subsection (3) unless—

(a)the court has given the Secretary of State or the Gas and Electricity Markets Authority a reasonable opportunity of making representations to it about the proposed order or direction; and

(b)the order or direction is consistent with the objective of the energy administration.

(6)In subsection (5) “in energy administration” and “objective of the energy administration” are to be construed in accordance with Schedule B1 to this Act, as applied by Part 1 of Schedule 20 to the Energy Act 2004.]

6 Challenge of decisions.E+W+S

(1)Subject to this section, an application to the court may be made, by any of the persons specified below, on one or both of the following grounds, namely—

(a)that a voluntary arrangement [F16which has effect under section 4A] unfairly prejudices the interests of a creditor, member or contributory of the company;

(b)that there has been some material irregularity at or in relation to either of the meetings.

(2)The persons who may apply under [F17subsection (1)] are—

(a)a person entitled, in accordance with the rules, to vote at either of the meetings;

[F18(aa)a person who would have been entitled, in accordance with the rules, to vote at the creditors’ meeting if he had had notice of it]

(b)the nominee or any person who has replaced him under section 2(4) or 4(2); and

(c)if the company is being wound up or [F19is in administration], the liquidator or administrator.

[F20(2A)Subject to this section, where a voluntary arrangement in relation to a company in energy administration is approved at the meetings summoned under section 3, an application to the court may be made—

(a)by the Secretary of State, or

(b)with the consent of the Secretary of State, by the Gas and Electricity Markets Authority,

on the ground that the voluntary arrangement is not consistent with the achievement of the objective of the energy administration.]

(3)An application under this section shall not be made[F21(a)]after the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) has been made to the court [F22or

(b)in the case of a person who was not given notice of the creditors’ meeting, after the end of the period of 28 days beginning with the day on which he became aware that the meeting had taken place,

but (subject to that) an application made by a person within subsection (2)(aa) on the ground that the voluntary arrangement prejudices his interests may be made after the arrangement has ceased to have effect, unless it came to an end prematurely.]

(4)Where on such an application the court is satisfied as to either of the grounds mentioned in subsection (1) [F23or, in the case of an application under subsection (2A), as to the ground mentioned in that subsection], it may do one or both of the following, namely—

(a)revoke or suspend [F24any decision approving the voluntary arrangement which has effect under section 4A] or, in a case falling within subsection (1)(b), any [F25decision taken by the meeting in question which has effect under that section];

(b)give a direction to any person for the summoning of further meetings to consider any revised proposal the person who made the original proposal may make or, in the case falling within subsection (1)(b), a further company or (as the case may be) creditors’ meeting to reconsider the original proposal.

(5)Where at any time after giving a direction under subsection (4)(b) for the summoning of meetings to consider a revised proposal the court is satisfied that the person who made the original proposal does not intend to submit a revised proposal, the court shall revoke the direction and revoke or suspend any [F26decision approving the voluntary arrangement which has effect under section 4A].

(6)In a case where the court, on an application under this section with respect to any meeting—

(a)gives a direction under subsection (4)(b), or

(b)revokes or suspends an approval under subsection (4)(a) or (5),

the court may give such supplemental directions as it thinks fit and, in particular, directions with respect to things done [F27under the voluntary arrangement since it took effect].

(7)Except in pursuance of the preceding provisions of this section, [F28a decision taken] at a meeting summoned under section 3 is not invalidated by any irregularity at or in relation to the meeting.

[F29(8)In this section “in energy administration” and “objective of the energy administration” are to be construed in accordance with Schedule B1 to this Act, as applied by Part 1 of Schedule 20 to the Energy Act 2004.]

[F306A False representations, etc.E+W+S

(1)If, for the purpose of obtaining the approval of the members or creditors of a company to a proposal for a voluntary arrangement, a person who is an officer of the company—

(a)makes any false representation, or

(b)fraudulently does, or omits to do, anything,

he commits an offence.

(2)Subsection (1) applies even if the proposal is not approved.

(3)For purposes of this section “officer” includes a shadow director.

(4)A person guilty of an offence under this section is liable to imprisonment or a fine, or both.]

7 Implementation of proposal.E+W+S

(1)This section applies where a voluntary arrangement [F31has effect under section 4A].

(2)The person who is for the time being carrying out in relation to the voluntary arrangement the functions conferred—

[F32(a)on the nominee by virtue of the approval given at one or both of the meetings summoned under section 3]

(b)by virtue of section 2(4) or 4(2) on a person other than the nominee,

shall be known as the supervisor of the voluntary arrangement.

(3)If any of the company’s creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, he may apply to the court; and on the application the court may—

(a)confirm, reverse or modify any act or decision of the supervisor,

(b)give him directions, or

(c)make such other order as it thinks fit.

(4)The supervisor—

(a)may apply to the court for directions in relation to any particular matter arising under the voluntary arrangement, and

(b)is included among the persons who may apply to the court for the winding up of the company or for an administration order to be made in relation to it.

(5)The court may, whenever—

(a)it is expedient to appoint a person to carry out the functions of the supervisor, and

(b)it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the court,

make an order appointing a person who is qualified to act as an insolvency practitioner [F33or authorised to act as supervisor, in relation to the voluntary arrangement], either in substitution for the existing supervisor or to fill a vacancy.

(6)The power conferred by subsection (5) is exercisable so as to increase the number of persons exercising the functions of supervisor or, where there is more than one person exercising those functions, so as to replace one or more of those persons.

[F347A Prosecution of delinquent officers of company.E+W+S

(1)This section applies where a moratorium under section 1A has been obtained for a company or the approval of a voluntary arrangement in relation to a company has taken effect under section 4A or paragraph 36 of Schedule A1.

(2)If it appears to the nominee or supervisor that any past or present officer of the company has been guilty of any offence in connection with the moratorium or, as the case may be, voluntary arrangement for which he is criminally liable, the nominee or supervisor shall forthwith—

(a)report the matter to the appropriate authority, and

(b)provide the appropriate authority with such information and give the authority such access to and facilities for inspecting and taking copies of documents (being information or documents in the possession or under the control of the nominee or supervisor and relating to the matter in question) as the authority requires.

• In this subsection, “the appropriate authority” means—

  (i)

  in the case of a company registered in England and Wales, the Secretary of State, and

  (ii)

  in the case of a company registered in Scotland, the Lord Advocate.

(3)Where a report is made to the Secretary of State under subsection (2), he may, for the purpose of investigating the matter reported to him and such other matters relating to the affairs of the company as appear to him to require investigation, exercise any of the powers which are exercisable by inspectors appointed under section 431 or 432 of the Companies Act to investigate a company’s affairs.

(4)For the purpose of such an investigation any obligation imposed on a person by any provision of the Companies Act to produce documents or give information to, or otherwise to assist, inspectors so appointed is to be regarded as an obligation similarly to assist the Secretary of State in his investigation.

(5)An answer given by a person to a question put to him in exercise of the powers conferred by subsection (3) may be used in evidence against him.

(6)However, in criminal proceedings in which that person is charged with an offence to which this subsection applies—

(a)no evidence relating to the answer may be adduced, and

(b)no question relating to it may be asked,

by or on behalf of the prosecution, unless evidence relating to it is adduced, or a question relating to it is asked, in the proceedings by or on behalf of that person.

(7)Subsection (6) applies to any offence other than—

(a)an offence under section 2 or 5 of the M1Perjury Act 1911 (false statements made on oath otherwise than in judicial proceedings or made otherwise than on oath), or

(b)an offence under section 44(1) or (2) of the M2Criminal Law (Consolidation) (Scotland) Act 1995 (false statements made on oath or otherwise than on oath).

(8)Where a prosecuting authority institutes criminal proceedings following any report under subsection (2), the nominee or supervisor, and every officer and agent of the company past and present (other than the defendant or defender), shall give the authority all assistance in connection with the prosecution which he is reasonably able to give.

(9)The court may, on the application of the prosecuting authority, direct any person referred to in subsection (8) to comply with that subsection if he has failed to do so.]

F357B Arrangements coming to an end prematurely.E+W+S

For the purposes of this Part, a voluntary arrangement the approval of which has taken effect under section 4A or paragraph 36 of Schedule A1 comes to an end prematurely if, when it ceases to have effect, it has not been fully implemented in respect of all persons bound by the arrangement by virtue of section 5(2)(b)(i) or, as the case may be, paragraph 37(2)(b)(i) of Schedule A1.