Creditors, particularly creditors’ agents, now require dividends to be paid at least quarterly in IVAs. However, the dividend terms in the current version of the R3 Standard Terms and Conditions are too cumbersome to permit the payment of frequent dividends. In particular they require the supervisor to issue a notice of intended dividend before declaring each dividend and to issue a notice of declaration of dividend when making the distribution. This is also costly for the supervisor when paying frequent dividends. Consequently, where IPs use the R3 Standard Terms and Conditions we are suggesting that they consider seeking a variation of the IVA with a view to replacing the dividend terms in the arrangement with those from the protocol standard terms. In order to keep costs down a variation is best sought by convening a meeting of creditors when sending the annual report to creditors.
That then brings me on the second point of this article, which is a reminder that to effectively vary an IVA, the requirements set out in the legislation relating to the approval of an arrangement must be satisfied. This means that it is both necessary to obtain the approval of the relevant percentages of creditors and the agreement of the debtor to the variation, prior to, or at the meeting to consider the variation. When you are initiating the variation this second part is easily over-looked. As with consents to modifications when seeking the approval of an arrangement at an initial meeting of creditors, ideally the consent to the variation by the debtor should be obtained in writing, but if that is not possible then a detailed file note recording the discussions held with the debtor should be kept.
