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:
Neither the company nor its creditors may approve a company voluntary arrangement (CVA) proposal or modification which affects the right of a secured creditor to enforce its security, unless that creditor concurs.
However, if the company invokes the little-used moratorium procedure under the Insolvency Act 1986 (IA 1986), Sch A1, then during the moratorium a secured creditor may only enforce its security with the permission of the court and subject to such terms as the court may impose. Similar provisions apply to the landlord’s right of re-entry.
The moratorium ends with approval of the CVA (unless the moratorium is extended for a period of up to two months under IA 1986, Sch A1 para 32). It therefore generally only affects the period in which the CVA proposal is being considered and does not apply while the CVA is in force.
Practically, it would be unusual to propose a CVA where there are important secured creditors or key landlords without holding discussions with them in advance of the CVA proposals being sent out. This is especially important where there is no moratorium which would prevent enforcement (see Practice Note: CVAs—landlord issues and remedies).
The Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024 apply to CVAs (see Practice Note: The Insolvency (England and Wales) Rules 2016—Part 2: Changes to company voluntary arrangements (CVAs) [Archived]).
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