Power to modify the proposal before creditors’ approval
Produced in partnership with Lexa Hilliard QC of Wilberforce Chambers
Power to modify the proposal before creditors’ approval

The following Restructuring & Insolvency guidance note Produced in partnership with Lexa Hilliard QC of Wilberforce Chambers provides comprehensive and up to date legal information covering:

  • Power to modify the proposal before creditors’ approval

There is very little statutory guidance on modifications to company voluntary arrangements (CVAs) and how to deal with them. Some guidance is given by Statements of Insolvency Practice (SIP) 3.2.

Modifications to the CVA proposal are permitted, provided that they do not:

  1. alter the CVA so drastically that it ceases to be a CVA at all (eg a modification to force the company to enter administration would not be allowed)

  2. modify, reduce or change the rights of a secured creditor to enforce its security (without that creditor’s express consent)

  3. change the order of payment of creditors such that any preferential creditor no longer has priority over non-preferential creditors (without that creditor’s express consent)

  4. disturb the principle that all preferential creditors rank pari passu for dividends (without the disadvantaged creditor’s express consent)

Modifications to the rights of preferential creditors cannot be accepted simply where a majority of the preferential creditors agree to them. Each affected preferential creditor must consent.

Modifications may be suggested by creditors or members pri