PROCEDURE FOR INDIVIDUAL VOLUNTARY ARRANGEMENTS
An IVA is a statutory procedure for
individuals or partnerships who are in financial
difficulties and insolvent. The procedure
is broadly the same for both individuals and
partnerships.
The debtor must seek the services of an IP
who he will nominate to be the supervisor
of the voluntary arrangement. A proposal will
be drafted in all but the most exceptional
cases by the IP, and this will be put before
a meeting of creditors.
An Application to the Court will be made which
will be supported by the draft proposal. At
the Hearing of the Application, the Court
may refuse the Application or more ordinarily
will grant an Interim Order. The Interim Order
will prevent creditors from commencing or
continuing with any proceedings in relation
to the debtor. This excludes common law self-help
remedies such as by way of example only, distress.
A meeting of creditors is then called at which
the creditors will have an opportunity to
discuss and modify where they consider necessary
the terms of the Proposal. They will then
vote upon the Proposal. The modifications
cannot of course be made without the consent
of the debtor.
In order to pass a Proposal, 75% in value
of the debtor’s debts must vote in favour
of a Proposal. If a Proposal is accepted,
the nominee will usually become the supervisor
of the Voluntary Arrangement.
It is extremely important that the debtor
lists all of his creditors as only various
creditors with notice of the meeting and entitled
to vote are bound by the Proposal. The following
example is the debtor conceals or accidentally
omits a debt and even with a Voluntary Arrangement
in place which has been accepted by the meeting
of voters, that voter can still petition for
the bankruptcy of the debtor.
The Voluntary Arrangement will typically make
provision for the debtor’s assets to be liquidated
by the supervisor and the proceeds to be paid
to the creditors. In addition, it is common
for the debtor to make a contribution out
of his income for the last part of the Voluntary
Arrangement which can be anything up to five
years.
The Supervisor will supervise the Voluntary
Arrangement and ensure that it is adequately
adhered to by the debtor. If a debtor defaults
in making payment into the Voluntary Arrangement
then usually the Supervisor is contractually
bound to petition for the bankruptcy of the
debtor. |
