A client has recently pointed out to us that Article 81 of the standard Table A Companies Act 1985 Articles of Association and Article 18 of the model Companies Act 2006 Articles require a director of a company to vacate office if they make “any arrangement or composition” with their creditors. As a result, if a director enters into an IVA then they will cease to be a director. This could potentially impact on their ability to be remunerated by the company and could also create problems in connection with their actions and duties in respect of the company, particularly if they were the sole director.
The fix for new IVAs involving directors is to check the Articles and if necessary get the members to pass a resolution deleting the offending clause. For existing IVAs where you have missed this requirement, the resolution should be retrospective, confirming that the debtor remained in post from the date of approval of the IVA and ratifying any actions he has taken in the period between approval of the IVA and passing the retrospective resolution.
