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CVA Creditors' Meetings

Common Questions and Answers (References to "Sections" and "Rules" are to the Insolvency Act 1986 and Insolvency Rules 1986 respectively)

Statement of Insolvency Practice 3 produced by our professional body, R3 covers the obligations on the nominee convening a creditors' meeting for a CVA and provides some guidance that readers might find helpful. Please follow this link.

SIP3 - CVA Nominees.doc PDF (200KB)

(Use the free Adobe Reader to view PDF files)

Where and when should the meeting be held?

The meeting should be called at a venue for the convenience of creditors at a time between 10.00am and 4.00pm.

At least fourteen clear days notice should be given to creditors and no more than 28 days (Rule 1.9).

What will happen at the creditors' and shareholders' meetings?

It will be assumed that shareholders and creditors will already have received and read the directors proposal for a CVA. Their meetings will therefore give them an opportunity to address questions to the directors and James Tickell of PricewaterhouseCoopers, the Joint Nominee.

The meeting of creditors will be held first. This will consider and vote upon any modifications that individual creditors might put forward with the agreement of the directors, following which a vote will be taken upon the whole proposal.

The shareholders' meeting will then consider any modifications that are put forward by individual shareholders. Following this, there will be a vote taken upon the whole proposal as previously approved by creditors and modified by shareholders.

Various other resolutions will be considered, in particular it is possible to propose modifications dealing with the choice of supervisors, the basis of their remuneration and the composition of any creditors' committee.

Who will be present at the meetings?

The joint nominee will chair both meetings. One of the directors will also be present.

Are you obliged to attend either meeting?

You are not obliged to attend in person the meeting that applies to you. On the one hand, it is your opportunity to ask questions of the directors and joint nominee before deciding whether to suggest any modifications and how to vote on the CVA proposal itself. On the other hand, the law recognises that shareholders and creditors are not always able to attend in person and allows you to ask a representative to attend as proxy-holder and vote on your behalf.

How does a shareholder ensure his vote counts at their meeting?

Shareholders at their meeting vote according to the rights attaching to their shares respectively in accordance with the company's articles (Rule 1.18(1)).

Where no voting rights attach to a shareholder's shares, he is nevertheless entitled to vote either for or against the proposal or any modification of it (Rule 1.18(2)). However, in determining whether a majority for any resolution has been obtained, there is to be left out of account any vote cast in accordance with Rule 1.18(2).

A shareholder may also need to lodge a proxy form if voting for someone else (see below).

How does a creditor ensure his vote counts at their meeting?

In order to vote, a creditor must have submitted a written notice of his claim and the chairman must have admitted that claim following the guidelines below. (Rule 1.19(3)). This notice needs to be submitted to the Nominee on or before the meeting but it would assist us if creditors could provide the details as soon as possible. Please see Appendix D for details of the creditors' claims as we currently understand them to be. You might also need to lodge a proxy form.

Do you need to lodge a proxy form?

If you are the shareholder or creditor personally (as opposed to acting through a limited company), you may vote in person by simply attending the appropriate meeting, as long as you have lodged a claim as explained above for the creditors' meeting.

If you do not want to attend the meetings, you may nominate someone else, or the chairman of the meeting, to vote for you. They can vote either on your instruction or at their discretion. Do however remember that the chairman is the joint nominee and you might wish to consider specifying clearly how he should vote. (Rule 8.1).

If you want someone else to represent you, you must do this by completing the enclosed proxy form or a substantially similar form. The form needs to be signed by the shareholder/creditor or else some person authorised by him, either generally or with specific instructions to vote on a particular resolution. The nature of the person's authority should be stated. If a company is the shareholder/creditor, a director should normally sign (Rule 8.2). The proxy form must then be submitted on or before the meeting in the same way as a written notice of the claim.

Please also remember that if the shares or debt is held by a limited company and you wish to attend and vote at the meeting, you should complete and return the proxy form even if you are a director of the company. Alternatively you can produce at the meeting a resolution authorising you to represent that company. (Rule 8.7)

Who decides whether your claim ranks for voting purposes at the creditors' meeting?

The Nominee has the power to accept or reject any part of your claim if he believes it to be appropriate (Rule 1.17(4)). If he is in doubt whether your claim should be admitted, he should mark it as objected to and allow it to vote. If however the objection is sustained, then your vote will be declared invalid (Rule 1.17 (6)).

If your vote was critical to the outcome of the meeting, this could change the resolutions that were passed and/or result in a further meeting (Rule 1.17(7))

How do you calculate your claim for voting purposes as a creditor?

Your vote is based on the value of your debt at the date of the meeting of creditors (or the date of an administration order if applicable). Votes rank in proportion to the claim.

What majorities are needed to approve resolutions?

A resolution to approve the proposal, or any modification to it, is passed at the creditors' meeting if a majority in excess of 75% in value of the creditors present in person or by proxy and voting on the resolution (Rule 1.19(1)). Votes on other resolutions need a simple majority (Rule 1.19(2)).

In addition to the 75% rule above, a simple majority of creditors not connected to the company must also approve the CVA proposal and any modifications to it (Rule 1.19(4).

Subject to any express provision in the articles, a resolution is passed at the shareholders' meeting if voted for by more than 50% in value of the members present in person or by proxy and voting on the resolution (Rule 1.20(1)). Only those shares which carry voting rights are to be counted (Rule 1.18(2)).

The proposal as modified will not be adopted unless approved by both shareholders and creditors so that any modifications put forward by shareholders will need to be put to a subsequent creditors' meeting.

What happens if you cannot yet quantify your claim with certainty?

A creditor shall not vote in respect of a debt for an unliquidated amount or any debt whose value is not ascertained. The one exception is where the chairman agrees to put on the debt an estimated minimum value for the purpose of entitlement to vote and admits the claim for voting (Rule 1.17(3))

What happens if your debt is partly secured?

You are entitled only to vote in respect of the balance of your claim (if any) after deducting the value of your security as estimated by you (Rule 1.19(3)). This security might include any rights arising under a retention of title agreement or distraint. The position with hire purchase agreements is complex and separate advice should be sought from us or your own advisors.

Are you bound by the terms of the CVA if approved at the meeting?

An approved CVA binds a creditor as if he were a party to it as long as that creditor firstly had proper notice of the creditors' meeting and secondly was entitled to vote at it in accordance with the rules.

This is the case whether or not he was present or represented at the meeting. For this reason, it is important that creditors properly consider the proposal since otherwise they can be bound by its terms.

What happens if you disagree with the nominee's decision?

You are entitled to appeal to the Court for an order directing the nominee to accept your claim for voting as a creditor within 28 days of the nominee reporting the result of the meeting to the Court. (Rule 1.17(8)).

Shareholders and creditors also have the right to petition the Court that the CVA unfairly prejudices their interests or that there was a material irregularity at the meeting (Section 6, Insolvency Act 1986).

We recommend that you seek legal advice about the merits of taking these steps in any particular circumstances.

How do I complete a proxy form?

How are the insolvency practitioner's fees approved at the creditors' meeting?

Please follow this link to a copy of the Statement of Insolvency Practice no 9 (revised December 2002) for a clear explanation of this question.

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This document explains the relevant position only in general terms. We do not intend it to be used as formal advice about a specific situation, for which you should consult with a qualified insolvency practitioner and not rely upon this document. Portland would be pleased to advise you formally and you should contact one of the directors listed to arrange this. Portland regrets it is unable to accept any responsibility to anybody who seeks to rely on this document.