UNITED KINGDOM - THE INSOLVENCY ACT 1986

COMPANY INSOLVENCY - COMPANIES WINDING UP

PART I - COMPANY VOLUNTARY ARRANGEMENTS

The Proposal

1. Those who may propose an arrangement

(1) The directors of the company (other than one of which administration order is force, or which is being wound up) may take a proposal under this Part to the company and to its creditors for a composition is satisfaction of its debts or a scheme or arrangement of its affairs (from here on referred to, in either case, as a "voluntary arrangement.
(2) A proposal under this part is one which provides for some person ("the nominee") to act in relation to the voluntary arrangement either as a trustee or otherwise for the purpose of supervising its implementation ; and the nominee must be a person who is qualified to act as an insolvency practitioner in relation to the company.
(3) Such a proposal may also be made;

(a) Where an administration order is in force in relation to the company, by the administrator, and
(b) Where the company is being wound up, by the liquidator.

2. Procedure where nominee is not the liquidator or administrator

(1) This section applies where the nominee under section 1 is not the liquidator or administrator of the company.
(2) The nominee shall, within 28 days (or such longer period as the court may allow) after he is given notice of the proposal for a voluntary arrangement, submit a report to the court stating;

(a) whether, in his opinion, meetings of the company and of its creditors should be summoned to consider the proposal, and
(b) if in his opinion such meetings should be summoned, the date on which, and time and place at which, he proposes the meetings should be held.

(3) For the purposes of enabling the nominee to prepare his report, the person intending to make the proposal shall submit to the nominee;

(a) a document setting out the terms of the proposed voluntary arrangement, and
(b) a statement of the company's affairs containing;

(i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed, and
(ii) such other information as may be prescribed.

(4) The court may, on an application made by the person intending to make the proposal, in a case where the nominee has failed to submit the report required by this section, direct that the nominee be replaced as such by another person qualified to act as an insolvency practitioner in relation to the company.

3. Summoning of Meetings

(1) Where the nominee under section 1 is not the liquidator or administrator, and it has been reported to the court that such meetings as are mentioned in section 2(2) should be summoned, the person making the report shall (unless the court otherwise directs) summon those meetings for the time, date and place proposed in the report.
(2) Where the nominee is the liquidator or administrator, he shall summon meetings of the company and of its creditors to consider the proposal for such a time, date and place as he thinks fit.
(3) The persons to be summoned to a creditors' meeting under this section are every creditor of the company whose claim and address the person summoning the meeting is aware.

Consideration and implementation of proposal
4. Decisions of Meetings

(1) The meetings summoned under section 3 shall decide whether to approve the proposed voluntary arrangement (with or without modifications).

(2) The modifications may include one conferring the functions proposed to be conferred on the nominee on another person qualified to act as insolvency practitioner in relation to the company.
But they shall not include any modification by virtue of which the proposal ceases to be a proposal such as is mentioned in section 1.
(3) A meeting so summoned shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security, except with the concurrence of the creditor concerned.
(4) Subject as follows, a meeting so summoned shall not approve any proposal or modification under which;

(a) any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts, or
(b) a preferential creditor of the company is to be paid an amount in respect of a preferential debt that bears to that debt a smaller proportion than is borne to another preferential debt by the amount that is to be paid in respect of that other debt.

However, the meeting may approve such a proposal or modification with the concurrence of the preferential creditor concerned.
(5) Subject as above, each of the meetings shall be conducted in accordance with the rules.
(6) After the conclusion of either meeting in accordance with the rules, the chairman of the meeting shall report the result of the meeting to the court, and, immediately after reporting to the court, shall give notice of the result of the meeting to such persons as may be prescribed.
(7) References in this section to preferential debts and preferential creditors are to be read in accordance with section 386 in Part XII of this Act.

5. Effect of Approval

(1) This section has effect where each of the meetings summoned under section 3 approves the proposed voluntary arrangement either with the same modifications or without modifications.
(2) The approved voluntary arrangement;

(a) takes effect as if made by the company at the creditors' meeting and;
(b) binds every person who in accordance with the rules had notice of, and was entitled to vote at, that meeting (whether or not he was present or represented at the meeting) as if he were a party of the voluntary arrangement.

(3) Subject as follows, if the company is being wound up or an administration order is in force, the court may do one or both of the following, namely;

(a) by order stay or sist all proceedings in the winding up or discharge the administration order;
(b) give such directors with respect to the conduct of the winding up or the administration as it thinks appropriate for facilitating the implementation of the approved voluntary arrangement.

(4) The court shall not make an order under section (3)(a);

(a) at any time before the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) has been made to the court, or
(b) at any time when an application under the next section or an appeal in respect of such an application is pending, or at any time in the period within which such an appeal may be brought.

6. Challenge of decisions

(1) Subject to this section, an application to the court may be made, by any of the persons specified below, on one or both of the following grounds, namely:

(a) that a voluntary arrangement approved at the meetings summoned under section 3 unfairly prejudices the interests of a creditor, member or contributory of the company:
(b) that there has been some material irregularity at or in relation to either of the meetings.

(2) The persons who may apply under this section are:

(a) a person entitled, in accordance with the rules, to vote at either of the meetings:
(b) the nominee or any person who has replaced him under section 2(4) or (4)2: and
(c) if the company is being wound up or an administration order is in force, the liquidator or administrator.

(3) An application under this section shall not be made after the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) has been made to the court.
(4) Where on such an application the court is satisfied as to either of the grounds mentioned in subsection (1), it may do one or both of the following, namely:

(a) revoke or suspend the approvals given by the meetings or, in a case falling within subsection (1)(b), any approval given by the meeting in question:
(b) give a direction to any person for the summoning of further meetings to consider any revised proposal the person who made the original proposal may make or, in a case falling within subsection (1)(b), a further company or (as the case may be) creditors' meeting to reconsider the original proposal.

(5) Where at any time after giving a direction under subsection (4)(b) for the summoning of meetings to consider a revised proposal the court is satisfied that the person who made the original proposal does not intend to submit a revised proposal, the court shall revoke the direction and revoke or suspend any approval given at the previous meetings.
(6) In a case where the court, on an application under this section with respect to any meeting:

(a) gives a direction under subsection (4)(b), or
(b) revokes or suspends an approval under subsection (4)(a) or (5), the court may give such supplemental directions as it thinks fit and, in particular, directions with respect to things done since the meeting under any voluntary arrangement approved by the meeting.

(7) Except in pursuance of the preceding provisions of this section, an approval given at a meeting summoned under section 3 is not invalidated by any irregularity at or in relation to the meeting.

7. Implementation of proposal

(1) This section applies where a voluntary arrangement approved by the meetings summoned under section 3 has taken effect.
(2) The person who is for the time being carrying out in relation to the voluntary arrangement the functions conferred:

(a) by virtue of the approval on the nominee, or
(b) by virtue of section 2(4) or 4(2) on a person other than the nominee, shall be known as the supervisor of the voluntary arrangement.

(3) If any of the company's creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, he may apply to the court: and on application the court may:

(a) confirm, reverse or modify any act or decision of the supervisor,
(b) give him directions, or
(c) make such other order as it thinks fit.

(4) The supervisor:

(a) may apply to the court for directions in relation to any particular matter arising under the voluntary arrangement, and
(b) is included among the persons who may apply to the court for the winding up of a company or for an administration order to be made in relation to it.

(5) The court may, whenever:

(a) it is expedient to appoint a person to carry out the functions of the supervisor, and:
(b) it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the court, make an order appointing a person who is qualified to act as insolvency practitioner in relation to the company, either in substitution for the existing supervisor or to fill a vacancy.

(6) The power conferred by subsection (5) is exercisable so as to increase the number of persons exercising the functions of supervisor or, where there is more than one person exercising those functions, so as to replace one or more of those persons.

Bankrupt.com | Resources for Restructuring Professionals