Tuesday, February 19, 2013

Hot News – Revised R3 standard terms for IVAs released!

Generally, as regular visitors will have noticed, Gareth posts our Blog articles.  However, every now and again an item comes along that gets my brain going and when that happens, apart from briefly checking with Gareth that I am not being too impulsive or offensive, I let my fingers loose on the keyboard.  The recent appearance of revised terms for use with IVAs on the R3 website is one such occasion.
One of several problems that I see is that nobody told me that they had been released.  I realise that IVAs are not everybody’s cup of tea, the Protocol Terms are more commonly used and therefore probably more significant and the changes that have been made are hardly earth-shattering, but couldn’t someone have at least told us they were out?  There are times when it seems that R3’s external communication with publicists and politicians is more effective than its internal communications with the members who fund it.  (disclaimer – the previous comment was made by a grumpy member only 4 months away from an unwanted anniversary and feeling his age.  It does not necessarily reflect the view of anyone other than the author)
Secondly, the timing of the revision has delayed the long awaited release of a major update to our IVA and CVA packs.   We produce separate IVA packs to use with the R3 and Protocol standard terms and our CVA packs uses a version of the R3 standard IVA terms adapted for corporate use so I now need to update them, but I cannot moan too much about that, as the updates were not quite ready anyway and since I am really to blame maybe I’d better move swiftly on….
So, if I stop whingeing and get over it, I suppose I should tell you what the changes are.  Before I do so, however, I have to make clear that I sympathise with those who dedicated their time to revising the terms.  There are probably few people in the country who are as aware as we are that getting every detail of a technical document like this is virtually impossible.  Our own standard documents are only as good as they are because of  the legions of eagle eyed clients and their staff who constantly help us watch out for typing errors and even the odd technical glitch from time to time. So, with tongue firmly inserted in cheek, quoting paragraph numbers from the new terms where appropriate and commenting where I feel the need using italics, here are the changes in the revised terms:
Unsurprisingly after Version 2 from 2004, the revised terms are Version 3 of January 2013.
Para 1(1) Definitions – you will recognise most of them, but a new one has been inserted at (q): “the Secretary of State” means the Secretary of State for Business Innovation and Skills or any successor office.
Para 1(2) new wording: References in the Arrangement to any statutory provision shall include a reference to any modification or re-enactment thereof for the time being in force. I’m not really sure this works.  I think this is an attempt to future proof the terms for the forthcoming reorganisation of the Rules, but while I am happy that references to “the Rules” could apply to the new ones, I am not sure that specific provisions can be so easily adapted.
Para 5(1) wording revised to:  Legal proceedings against the Debtor in existence at the commencement of the Arrangement in respect of Debts which are subject to the Arrangement shall, unless they are of a type contemplated by Paragraph 4(4) or the Supervisor otherwise directs, be discontinued by the Creditor with no order as to costs as soon after the commencement of the Arrangement as is practicable. This appears to be giving the supervisor more discretion to allow legal proceedings to continue while discouraging orders for costs.  I would expect the court to consider the proceedings whether the supervisor consented or not and to make whatever order for costs it sees fit, no matter what the standard terms say.
Para 8(2) deleted the words “for the purposes of finalising the administration of the arrangement”. This is a sensible and pragmatic amendment that gives a supervisor wider powers to extend an arrangement.
Para 9(3) reference to “Trade and Industry” deleted after “Secretary of State”.  They’ve missed a required amendment here, as this term suggests that you have to file a completion certificate in court, which is not required in a non-court route case.
Para 13(2) new paragraph dealing with joint and several powers for joint office holders.   However it is missing the word “one” between “more than” and “person” and in any event Rule 5.25(1) requires you to take a separate resolution for this, so there is no point in having it in the standard terms really. Finally, I am not sure it all needs to be in bold type.
Para 17(1) inserts the words “(whether as trustee or otherwise)”. This looks like an attempt to provide for fees in post appointment work like sorting out PPI claims and dealing with residual balances post-failure, but I don’t think it would help if the proposals use a different basis or creditors subsequently modified the fee basis.
Para 20(4) reference to “Trade and Industry” deleted after “Secretary of State”.   Again, though, reference to court has been left in, so the term does not work for arrangements under the non-court route.
Para 21(2) allows “any other interested party” to convene a meeting to fill a vacancy in the office of Supervisor.   I am not sure that I am keen on the choice of wording.  Unqualified, this could allow almost anyone to convene the meeting, potentially resulting in more than one conflicting meeting being convened.
Para 27(2) This used to be para 27(3), the old para 27(2) having been deleted.  The old para 27(2) excluded those assets that would have been exempt in bankruptcy (tools of trade, furniture, etc.) from being caught as after-acquired assets.  I am not sure what this change achieves,  It may have been deleted because it was not needed if the assets are exempt anyway, or is it an attempt to allow a supervisor to claim as after-acquired assets those assets that would in the past have been treated as exempt?  If it is the latter, I’d be surprised if the courts were happy with the concept were it to be challenged.
Para 29(2) New paragraph requiring a debtor to help get a restriction registered over any property.
Para 33 An old numbering error corrected.  But why did they not sort out 32A at the same time?
Para 34 Reference to “affidavit” replaced by reference to “witness statement” and “witness statement with a statement of truth”.
Para 37(1) Actually shown as para 337(1). Another old numbering error they did not see fit to correct.
Para 47 References to “annual report” and “Rule 5.31” replaced by “progress report”.  A sensible piece of future proofing, as long as the Service and the Rules Committee don’t decide to call reports something else next time around!
Para 56(1) Actually shown as para 5611. Another old error left in to give the terms that familiar feeling.
Para 56(2) and (3) Clarified paragraph about where to pay any unpaid dividends, allowing them to be paid to a Trustee if the debtor is bankrupt.  Shame “bankruptcy” is incorrectly spelt in each paragraph and with a different spelling mistake in each!
Para 56(3) Actually shown as para 56(13). A new typo for consistency with the old version.
Para 62(3) Actually shown as 623. A brand new typo in an otherwise unchanged paragraph.
Para 62A New term allowing remote attendance and importing S379A(4)-(8) and Rules 12A.22-23.  Call me an old misery, but I really cannot see the point in allowing remote attendance when virtually every IVA meeting is proxy-only now.
Para 62B New term allowing the use of websites for notices.  The problem is, this is already allowed by statute at section 379B so simply is not required. As we have found there, while the electronic provisions are nice in theory they only work if the creditors and their agents accept electronic notices. Even then, the time you all want to use them to gain the biggest cost reduction is in the initial pack, which is before the proposals are approved, so the standard terms have no effect.
Para 64(1) Adds “and whether the claim is secured or unsecured”, allowing the chairman greater discretion when dealing with claims for voting purposes.
Para 69(1) Actually shown as 691. Another brand new typo in an otherwise unchanged paragraph.
Para 71 Inserts the words “or the Supervisor has already presented a petition for the Debtor’s bankruptcy”. I think this was made for one particularly weird set of circumstances that someone doing the drafting had seen, as I am struggling to think when I would be thinking of issuing a notice of breach if I was already petitioning…a case of putting the cart before the Findus Burger? Rather worryingly, someone will probably now explain it all to me and I'll have to eat my words, not that I am too concerned, having shopped at Tesco.
Para 73 to 79 References to “Inland Revenue” or “Customs and Excise” changed to “Her Majesty’s Revenue and Customs”.
I’d like to leave you with one last thought.  When I was asked if I had any thoughts about a proposed revision to the standard terms I said it would be better to use the Protocol ones, or copy the dividend and payment break terms from the Protocol to make the R3 terms more relevant in modern IVAs.  Since I was fairly dismissive of them, it is more than a little churlish of me to stand in judgement over them now.  Frankly it would serve me right if someone finds a typo in this article and reminds me that I am still not perfick!