Make Your IVA Vote Count
Through in-depth knowledge of the Insolvency Act 1986 Senior Associate Joanna Buckley achieved a fantastic result for a client, which saw security granted outside of an IVA.
Greenhalgh Kerr was instructed to recover large sums from a guarantor following the demise of the limited company, of which they were a director.
A statutory demand was served on the director and a bankruptcy petition was presented following their failure to pay the sums owed.
The first hearing of the petition was adjourned as the director proposed an IVA to creditors.
Due to the conduct of the director generally and in particular, failing to assist with recovery of the high value assets subject to the hire agreement, the client did not wish to vote in favour of the IVA.
An IVA requires 75% majority by value of creditors to approve it. Our client’s debt constituted more than 35% of the overall debt and therefore it was clear that their vote would influence the overall outcome.
Following enquiries into all creditors noted on the proposal, a number of creditors were ‘associated creditors’ as per s435 of the Insolvency Act 1986.
As there were associated creditors the IVA would have two rounds of voting:
- The first vote is 75% by value of creditors or more in favour
- The second round of voting (which excludes the associated creditors) 50% or more in value in favour
Following negotiations with the creditors, our client was able to use the power of their vote to their advantage. The decision for the creditors was to either accept our client’s proposal, which meant that the return for creditors was much improved and our client was granted a charge on the property.
Or our client would reject the IVA and continue with its bankruptcy petition with a risk all creditors would receive a much lesser return following a bankruptcy order being made. We were able to successfully negotiate a property charge for our client and the IVA was approved and the petition dismissed.
Take away points
- An IVA is not a foregone conclusion and there is of course no guarantee that it would also run its course. Creditors are often made to wait long periods of time before any returns are made. In obtaining a voluntary charge our client’s debt was secured meaning payment to them will be guaranteed regardless of the outcome of the IVA.
- Make your vote count particularly if the value of your debt will influence the overall outcome.
- Coming up with a strategy at an early stage is fundamental to achieving better results.