Q&As

At what point does a creditor become 'connected' or an 'associate' in the context of voting on a Company Voluntary Arrangement? Can a creditor choose not to exercise control in order to be unconnected?

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Published on LexisPSL on 19/02/2021

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • At what point does a creditor become 'connected' or an 'associate' in the context of voting on a Company Voluntary Arrangement? Can a creditor choose not to exercise control in order to be unconnected?
  • Connected
  • Associate
  • How is this decided?
  • Can a creditor choose not to exercise control in order to be unconnected?

At what point does a creditor become 'connected' or an 'associate' in the context of voting on a Company Voluntary Arrangement? Can a creditor choose not to exercise control in order to be unconnected?

Connected

Rule 15.34(4)–(5) of the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, renders invalid any resolution approving or modifying the proposal by the creditors if those voting against it include more than half in value of the creditors who are not, to the best of the chairman's belief, connected with the company. See Commentary: Procedure where no moratorium is in force: Tolley's Insolvency Law Service [P2015].

Associate

IR 2016, SI 2016/1024, r 15.34(7) provides that a creditor is not an associate of the debtor unless the convener or the chair decides that the creditor is an associate of the debtor. IR 2016, SI 2016/1024, r 15.34(7)(b) provides that in deciding whether a creditor is an associate of the debtor, reliance may be placed on the information provided by the debtor's statement of affairs or otherwise in accordance with the Rules. This does not prevent the convener or the chair relying on other information, such as information provided by

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