Company Voluntary Arrangements and Administrations

Transcription

1 Company Voluntary Arrangements and Administrations Second Edition Geoffrey M Weisgard, Michael Griffiths and Louis Doyle I] JORDANS

2 CONTENTS Preface Table of Cases Table of Statutes Table of Statutory Instruments Table of Abbreviations v xiii xxvii xxxiii xxxvii Chapter 1 Introduction 1 Introduction and background 1 The nature of a CVA 2 A deal between a company and its creditors 2 A composition or scheme of arrangement 4 The CVA as a contract and as a trust 5 A minimum return to creditors 5 Proposal by persons other than the directors 6 Sources of information 6 Lack of popularity, 7 Precursors to the modern CVA 7 Trends in relation to CVAs 8 Reasons for the CVA's lack of popularity. 9 Lack of popularity amongst insolvency practitioners 9 Acceptability of 'phoenix' companies 9 Lack of awareness amongst company directors 10 Attitude of the tax authorities 11 Lack of moratorium 12 The administration procedure - 12 Attitude of regulators 12 The moratorium 13 Alternative methods of corporate rescue 15 The rescue culture 15 Arrangement under the Companies Act 2006, ss The turn-around procedure 15 Receivership 16 Administration 17 The voluntary arrangement procedure: summary 18 Table 1.1: Summary of the CVA procedure 19 Qualifications of the supervisor 23 Management of a company in voluntary arrangement 24

3 viii Company Voluntary Arrangements and Administrations The provision of funding 26 Involvement of the official receiver 29 Involvement of the court 29 Involvement of the members 31 Chapter 2 The Procedure 33 Initial meetings with the directors 33 The proposal and statement of affairs 36 The directors' meeting 37 The moratorium and its effects 38 Meetings of members and creditors 48 Implementation 51 Default 52 Chapter 3 The Nominee and His Report 53 The role of the nominee 53 The nominee's report 55 The nominee as expert witness 58 Chapter 4 Costs 61 Introduction 61 The Ferris Report 63 Further guidance 65 Practice Statement on Remuneration 66 Disbursements 68 Chapter 5 The Proposal 69 Generally 69 Background and history 71 Funding 71 Assets 71 Liabilities 74 Payments into the arrangement and duration 75 Breach or non compliance 76 Costs 76 Dividends 76 Co-operation 77 Guarantees, credit and other matters 77 The supervisor, his duties and powers 78 Voidable transactions and offences 79 Chapter 6 Creditors 81 Introduction 81

4 Contents ix HM Revenue and Customs (HMRC) 82 The preferential status of certain liabilities 82 Date for calculating liabilities 83 Crown set-off 83 Development of attitude to voluntary arrangements by the Crown 83 Preferential creditors 85 Creditors secured or partly secured by fixed charges 87 Creditors secured by floating charges 94 Ordinary unsecured creditors 96 Creditors whose claims are uncertain 99 Creditors whose claims are payable in the future 106 Creditors claiming set-off 107 Creditors who are connected 108 Employees 111 Guarantors and joint liabilities 114 Overseas creditors 116 Creditors'committees 117 Chapter 7 The Creditors' Meeting 121 General 121 Creditors not given notice of a creditors' meeting 126 The chairman of a creditors' meeting 129 Adjournment of a creditors' meeting 130 Attendance by a director at a creditors' meeting 133 Proxies 135 Modifications 137 Chairman's report and records 140 Challenge of decisions of a creditors' meeting 142 Chapter 8 Implementation and Supervision of the CVA 151 Disclosure 151 Implementation of the proposal 153 The supervisor as trustee and arbitrator 161 The payment of dividends to creditors 162 Regulation and compliance 165 Challenge of directors' actions 167 Variation of the terms of a voluntary arrangement 174 Voluntary arrangement following liquidation 178 Change of supervisor 182 Satisfactory completion of the arrangement 185 Personal conduct of the supervisor 187 Chapter 9 Breach and Failure of a CVA 191 Breach of the voluntary arrangement 191 The liability of the supervisor 194

5 x Company Voluntary Arrangements and Administrations The liability of directors 201 Certificate of termination 203 Effect of default on trust created by a CVA 205 Winding-up petition following default 208 Supervisor subsequently acting as liquidator 210 Administration following a CVA 212 Chapter 10 Taxation 215 Corporation tax 215 Value added tax 217 PAYE income tax 220 Personal liability of company's officers 220 Chapter 11 Partnership Voluntary Arrangements 223 Partnerships generally 223 Limited liability partnerships 225 Partnerships - the moratorium 228 Chapter 12 The Administration Procedure 233 Introduction 233 Unpopularity of old style administrations 233 Contractual nature of receiverships 234 Reform of the administration procedure 234 Pre-packaged administrations 235 Changes to the law 235 What is administration? 236 The purpose in more detail. 237 Administrations and other insolvency procedures 238 Terminology used 239 General duties of the administrator 240 Re Consumer & Industrial Press Ltd 241 The administrator 241 Protection for purchasers from administrators 243 Restrictions against administrations 244 Routes into administration since 15 September Appointment by the court 244 Appointment by the holder of a floating charge 247 Appointment by the company or its directors 249 Moratorium 250 Approval of the administrator's proposals 251 'Pre-packs' 252 Duration of administration 254 Application to limited liability partnerships and partnerships 254 Post-administration disposals of property and assets 255

6 Contents Dealing with specific assets (a) Land Leases The landlord's perspective (b) Chattels Reservation of title (c) Existing contracts (d) Customer deposits (e) Leased assets/assets subject to hire purchase (f) Intangible assets (g) Book debts Other issues (a) TUPE Insolvency (b) Pensions (c) No warranties, etc (d) 'Phoenix companies' - Insolvency Act 1986, s 216 (e) Substantial property transactions involving directors - Companies Act 2006, s 193 (f)vat Statement of Insolvency Practice 16 Practitioners Legal authority for pre-packs Preparatory work Disclosure Appendix 1 Sample Engagement Letter Appendix 2 Sample Proposal (Including Standard Conditions) 281 Appendix 3 Sample Nominee's Report 305 Appendix 4 Sample Chairman's Report 309 Appendix 5 Sample Annual Report 311 Appendix 6 Sample Final Report Following Breach 317 Appendix 7 HMRC Helpsheet 323

7 xii Company Voluntary Arrangements and Administrations Appendix 8 Forms 327 Appendix 9 Statement of Insolvency Practice No Appendix 10 Statement of Insolvency Practice No Appendix 11 Statement of Insolvency Practice No Index 387