Voluntary arrangements
Section 356: Authority’s powers to participate in proceedings: company voluntary arrangements
634.Insolvency legislation allows companies in financial difficulties to propose a voluntary arrangement with creditors; that is, for creditors to agree to take a proportion of what they were owed as a final settlement of their debts. If agreed, such an arrangement is binding on all creditors who were aware of the proposal, subject to their right to ask the court to intervene if the arrangement seems improper or unfair. This section gives the Authority the right to apply to the court in the same way as a creditor, and also makes clear that the Authority may be represented in any such proceedings initiated by a creditor.
Section 357: Authority’s powers to participate in proceedings: individual voluntary arrangements
635.In England and Wales and in Northern Ireland insolvency law provides that an individual who is in financial difficulties may apply to the court for a moratorium during which he may prepare a proposal to his creditors for settlement of his debts. Whilst this moratorium is in force the individual is protected against the presentation of a bankruptcy petition.
636.Subsection (1) of this section provides that the Authority is entitled to be heard by the court on an application for such a moratorium, if this is made by an individual who is an authorised person. Subsections (3) and (4) provide that the Authority is entitled to send a representative to attend and speak at any meeting of creditors summoned to consider a proposal which a debtor brings forward, and that it shall be informed of the results of any such meeting. Subsection (5) goes on to provide the Authority with the same rights as creditors to challenge in court a decision by the meeting to agree a creditor’s proposal, or to challenge the implementation of an agreed proposal, if it believes that this is in some way unfair or irregular, whilst subsection (6) provides that the Authority is entitled to be heard by the court if any other person makes such a challenge.
Section 358: Authority’s powers to participate in proceedings: trust deeds for creditors in Scotland
637.Section 357 provides the Authority with powers to be involved in individual voluntary arrangements proposed for authorised persons. Such arrangements are only possible in England, Wales and Northern Ireland. This section makes provision for the Authority to have certain rights in the equivalent arrangement in Scots law (a voluntary trust deed for creditors within the meaning of section 5(4A) of the Bankruptcy (Scotland) Act 1985).
638.The purpose of a trust deed under Scots law is to allow a person who cannot pay his debts to hand over his assets to a trustee, who may then arrange a settlement with his creditors as a alternative to proceedings for sequestration under the 1985 Act. Subsections (1) and (2) provide that where a trust deed is granted in respect of an authorised person, the trustee must, as soon as he becomes aware that the person concerned is an authorised person, inform the Authority, and send it copies of the deed and any other documents which he has sent to the creditors.
639.Under subsection (3) the Authority is given the same rights as certain creditors who have not received notice of the trust deed, or who have objected to it, to petition for the sequestration of a debtor who is an authorised person.
640.If the trustee proposes at any stage to hold a meeting of creditors, subsections (4) and (5) require him to inform the Authority, which will have the right to send a representative to attend and speak at the meeting. However, the Authority will not have the right to vote at the meeting, except on those occasions where it is itself a creditor of the person concerned.
