Secured creditors under a CVA—including effect on guarantees
Produced in partnership with Lexa Hilliard QC of Wilberforce Chambers

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

  • Secured creditors under a CVA—including effect on guarantees
  • Who is a secured creditor?
  • Importance of the CVA’s terms
  • Impact of a CVA on Landlords
  • Impact of a CVA on creditors with a guarantee or where debtor jointly-liable
  • Protecting interests of landlords or creditors with guarantees
  • Can a secured creditor prove in the CVA?

Secured creditors under a CVA—including effect on guarantees

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.

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 (see Practice Note: CVAs—landlord issues and remedies). Further, for any CVA that is proposed within 12 weeks of the end of a moratorium under CIGA 2020, the holders of any unpaid moratorium debts and priority pre-moratorium debts have, in effect, a veto right in respect of the CVA as neither the company nor the creditors may approve a CVA unless these debts are paid in full (unless the creditors consent); Schedule 3, paragraph 4 of CIGA 2020 provides protection for creditors of unpaid moratorium debts and priority pre-moratorium debts (as defined in new IA 1986, s 174A) in a subsequent company voluntary arrangement (see Practice Notes: Corporate Insolvency and Governance Act 2020—moratorium and Corporate Insolvency and Governance Act 2020—impact on CVAs).

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]).

The CVA proposal

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