Appeal of decision procedures convened to vary a VA

While working on the update for the Compliance On Call CVA pack, it occurred to us that when it comes to varying a voluntary arrangement, the rules are not entirely clear as to whether rule 15.35 allows for a 21 day or a 28 day window to appeal the decision. The same applies to IVAs.

Rule 15.35, which relates to appeals against decisions by the convener or chair under Chapter 8 of the Rules, states that a decision of the convener or chair is subject to appeal to the Court by a creditor, contributory, bankrupt or debtor and, in the case of a CVA a member of the company. Rule 15.35(4) indicates that such an appeal must be made within 21 days of the decision date. 

When it comes to “proposed” IVAs and CVAs, however, Rule 15.35(5) states that the appeal period is 28 days beginning on the day on which the first of the reports of the meeting of the company and the decision of the creditors are filed in Court.

 

The purpose of the wording in rule 15.35(5) is different to the provisions for CVAs set out in section 6 and paragraph 38 of Schedule A1, and for IVAs set out in section 262, which allow an application to the Court to challenge the decisions on the grounds of unfair prejudice or material irregularity. The provision in the rule is just about the convener or chair’s decision making at the meeting in respect of creditors and their voting rights, not in respect of the arrangement’s approval as a whole.

The problem is that both the Act and Rules apply only to the CVA or IVA proposal and both remain silent on the issue of variations. We know that variations of a voluntary arrangement are possible if the proposals make provisions for them and set out the decision procedure to be followed to obtain creditor approval of any proposed variation. There is an argument, but not a particularly convincing one, to say that as the initial decision is the only procedure governed by the Act, the rules will not apply to any subsequent decision procedure and that, unless one has been imported onto the proposals, there is no appeal period for subsequent decisions. It seems more appropriate that if a decision is being sought in a formal insolvency that it falls under the rules, and since rule 15.35(4) sets a 21 day period to appeal any decision of the convener or chair about creditors and their voting rights, that that would apply to any variation decision. Because it is, by then, an approved arrangement, the exclusion in rule 15.35(5) which applies to “proposed” arrangements no longer applies.

This approach is reinforced by the R3 Standard Terms for IVAs (which we have adapted for use in our standard CVAs) as they import most of Part 15 of the Rules when seeking decisions of creditors and Rule 15.8 sets out the requirements for notices to creditors where a decision is sought. It states that the notice must contain… “a statement that a creditor may appeal a decision in accordance with rule 15.35, and the relevant period under rule 15.35 within which such an appeal may be made”.