Consultation Responses & Papers

Simplified Individual Voluntary Arrangements

04 August 2008


Comments by the Association of Business Recovery Professionals (‘R3’) in response to the consultation document issued by the Insolvency Service in May 2007

1. We are pleased to have the opportunity to comment on the consultation document on proposed changes to the individual voluntary arrangement regime. We note that the specific questions set out in the paper are primarily concerned with the extent to which the proposals satisfy the conditions necessary for a legislative reform order. We generally support the proposal to introduce the changes by means of a LRO, and do not comment in detail on the questions posed in the response form. However, we do have some comments on the details of the proposals themselves, and these are set out below.

Simplified IVAs

2. We are in favour of the introduction of a SIVA procedure, but have the following observations on the details.

Level of debts

3. It is the experience of our members that the level of indebtedness encountered even in simple consumer debt cases is increasing. We therefore suggest that the qualifying level of debt be increased to £100,000. With any arbitrary limit there will be problems at the margin, and cases which fall just one side or the other. Raising the limit will help to make the procedure more widely available to those who could benefit from it.

Voting by correspondence/no modifications

4. We agree that voting should be by correspondence, without the need for a creditors’ meeting, and that creditors should not have the right to modify the proposals. However, there needs to be a mechanism to allow the nominee to amend the proposal and re-submit it to creditors if feedback from creditors, or other information which comes to light, suggests that an amended proposal is more likely to be approved. Otherwise there is a danger that the rejection of a proposal which might be viable with some minor amendment will force the debtor to abandon the SIVA route and go through the full IVA process, with all its attendant complexity and cost. Obviously any amendments should have to be agreed by the debtor.

Approval by a simple majority in value

5. We agree that approval should be by simple majority in value. However, we think that some thought needs to be given to the position of connected parties. In a normal IVA, approval is subject to two tests. A proposal is approved if more than three-quarters of the creditors in value vote in favour, but is not approved if those voting against include more than half in value, excluding, among others, those who are associates of the debtor. There is nothing in the consultation document to suggest that the safeguard afforded by this second test will not apply in a SIVA,
and we can see no reason why it should not do so.

Simplified reporting requirements/reduced filing of papers in court

6. We support these proposals.

90 day limit for filing claims

7. We agree that having a time limit for filing claims will help to expedite the process. However, 90 days is likely to be too short for some creditors, such as those which take assignments of large amounts of debt, because of the time it takes to obtain the documentation necessary to establish their claim. It is possible that this problem could be overcome by allowing the nominee discretion to extend the deadline, but this could leave things rather open-ended. On balance we favour having an absolute deadline, but extending it to 120 days.

Conclusion on SIVAs

8. In our view there should be sufficient protection for creditors in the proposed SIVA procedure as outlined in the paper to satisfy the requirements for a legislative reform order.

Amendment of section 389A of the Insolvency Act 1986

9. In our view a person cannot be properly qualified to act in one insolvency capacity without having knowledge of the full range of insolvency processes. For this reason we have always been opposed to the idea of limited licences. It is not possible to act in an IVA without also having knowledge of bankruptcy law and practice. If any regulatory body proposes to authorise any of its members to act as nominees or supervisors in IVAs but not in other capacities, it is therefore essential that they should be required to pass an examination in both IVAs and bankruptcies. In the case of company voluntary arrangements, which are often used in conjunction with other corporate processes, there is even less justification for allowing authorisations to act solely in one capacity, and even more reason why practitioners in this area should be required to demonstrate knowledge of all corporate insolvency procedures.

Repeal of the Deeds of Arrangement Act 1914

10. We have considered whether there is a case for keeping deeds of arrangement on the grounds that it is better to retain, rather than to lose, an available insolvency process which may be of use in limited circumstances, however infrequently. On balance, however, we are persuaded that they are probably now of little use, and that students of insolvency should be relieved of the burden of having to learn about them.

Restructure and restatement of Part VIII of the Insolvency Act 1986

11. We are in favour of restructuring Part VIII of the Insolvency act to make it easier to understand. However, we should be grateful to have an opportunity to see and comment on the draft legislation at an early stage.

Association of Business Recovery Professionals
23 July 2007


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