The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 434. Those who may propose an arrangement
(1) The directors of a company may make a proposal under this Part to its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs (in this Act referred to in either case, as a “voluntary arrangement”).
(2) A proposal under this Part is one which provides for some person (“the nominee”) to act in relation to the voluntary arrangement either as trustee or otherwise for the purpose of supervising its implementation, and the nominee shall be a person who is qualified to act as an insolvency practitioner in relation to the company.
(3) Such a proposal may be made where—
(a) an administration order is in force in relation to the company, by the administrator ; and
(b) the company is being wound up, by the liquidator.
Section 435. Procedure where nominee is not the liquidator or administrator
(1) This section applies where the nominee under section 434 is not the liquidator or administrator of the company.
(2) The nominee shall, within 28 days (or such longer period as the Court may allow) after he is given notice of the proposal for a voluntary arrangement, submit a report to the Court stating—
(a) whether, in his opinion, meetings of the company and of its creditors should be summoned to consider the proposal ; and
(b) if, in his opinion, such meetings should be summoned, the date on which, and time and place at which, he proposes the meetings to be held.
(3) For the purposes of enabling the nominee to prepare his report, the person intending to make the proposal shall submit to the nominee—
(a) a document setting out the terms of the proposed voluntary arrangement ; and
(b) a statement of the company’s affairs containing—
(i) particulars of its creditors, its debts and other liabilities and of its assets as may be prescribed, and
(ii) other information as may be prescribed.
(4) The Court may, on an application made by the person intending to make the proposal, in a case where the nominee failed to submit the report required by this section, direct that the nominee be replaced as such by another person qualified to act as an insolvency practitioner in relation to the company.
Section 436. Summoning of meetings
(1) A proposal may also be made where the nominee is —
(a) not the liquidator or administrator, and it has been reported to the Court that such meetings should be summoned, the person making the report shall (unless the Court otherwise directs) summon those meetings for the time, date and place proposed in the report ; and
(b) the liquidator or administrator, he shall summon meetings of the company and of its creditors to consider the proposal for such a time, date and place as he thinks fit.
(2) The persons to be summoned to a creditors’ meeting under this section are every creditor of the company of whose claim and address the person summoning the meeting is aware.
Section 437. Decisions of meetings
(1) The meetings summoned shall decide whether to approve the proposed voluntary arrangement with or without modifications.
(2) The modifications may include conferring the functions proposed to be conferred on the nominee on another person qualified to act as an insolvency practitioner in relation to the company but shall not include any modification by virtue of which the proposal ceases to be a proposal such as is mentioned in section 434.
(3) A meeting so summoned shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security, except with the concurrence of the creditor concerned.
(4) A meeting so summoned shall not approve any proposal or modification under which—
(a) any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts ; or
(b) a preferential creditor of the company is to be paid an amount in respect of a preferential debt that bears to that debt a smaller proportion than is borne to another preferential debt by the amount that is to be paid in respect of that other debt provided that the meeting may approve such a proposal or modification with the concurrence of the preferential creditor concerned.
(5) Subject to the provisions of this section, each of the meetings shall be conducted in accordance with the rules.
(6) After the conclusion of either meeting in accordance with the rules, the chairman of the meeting shall report the result of the meeting to the Court, and, immediately after reporting to the Court, shall give notice of the result of the meeting to such persons as may be prescribed.
Section 438. Approval of arrangement
(1) This section applies to a decision, under section 437, with respect to the approval of a proposed voluntary arrangement.
(2) The decision has effect if, in accordance with the rules—
(a) it has been taken by both meetings summoned under section 436 ; or
(b) subject to any order made under subsection (4) it has been taken by the creditors’ meeting summoned under that section.
(3) If the decision taken by the creditors’ meeting differs from that taken by the company meeting, a member of the company may apply to the Court.
(4) An application under subsection (3) shall not be made after the end of 28 days beginning with—
(a) the day on which the decision was taken by the creditors’ meeting ; or
(b) where the decision of the company meeting was taken on a later day, that day.
(5) On an application under subsection (3), the Court may—
(a) order the decision of the company meeting to have effect instead of the decision of the creditors’ meeting ; or
(b) make such other order as it deems fit.
Section 439. Effect of approval
(1) This section applies where a decision approving a voluntary arrangement has effect under section 437.
(2) The order of the Court that the decision of the company meeting should have effect instead of the decision of the creditors’ meeting—
(a) takes effect as if made by the company at the creditors’ meeting ; and
(b) binds every person who, in accordance with the rules—
(i) was entitled to vote at that meeting (whether or not he was present or represented at it), or
(ii) would have been so entitled if he had had notice of it, as if he were a party to the voluntary arrangement.
(3) Where the arrangement—
(a) ceases to have effect, any amount payable, under the arrangement to a person bound by virtue of subsection (2) (b) (ii) has not been paid, and
(b) did not come to an end prematurely, the company shall at that time become liable to pay to that person the amount payable under the arrangement.
(4) Where the company is being wound up or is in administration, the Court may—
(a) by order, stay all proceedings in the winding-up or provide for the appointment of the administrator to cease to have effect ; or
(b) give such directions with respect to the conduct of the winding-up or the administration as it considers appropriate for facilitating the implementation of the order of the Court that the decision of the company meeting should have effect instead of the decision of the creditors’ meeting on the voluntary arrangement.
(5) The Court shall not make an order under subsection (4) ( (a) at any time before the end of 28 days beginning with the first day on which each of the reports required by section 435 (2) has been made to the Court ; or
(b) at any time when an application under section 435 (4) or an appeal in respect of such an application is pending, or at any time in the period within which such an appeal may be brought.
Section 440. Challenge of decisions
(1) Subject to this section, an application to the Court may be made, by any of the persons specified in subsection (2), on the ground that—
(a) a voluntary arrangement which has effect under section 437 unfairly prejudices the interests of a creditor, member or contributory of the company ; or
(b) there has been some material irregularity at or in relation to either of the meetings.
(2) The persons who may apply under subsection (1) are—
(a) persons entitled, in accordance with the rules, to vote at either of the meetings ;
(b) persons who would have been entitled, in accordance with the rules, to vote at the creditors’ meeting if they had had notice of it ;
(c) the nominees or persons who replaced them under section 435 (4) or 437 (2) ; and
(d) if the company is being wound up or is in administration, the liquidator or administrator.
(3) An application under this section shall not be made—
(a) after the end of 28 days beginning with the first day on which each of the reports required under section 435 (2) has been made to the Court, or
(b) on which each of the reports required by section 435 (2) has been made to the Court but (subject to that), an application made by a person within this subsection on the ground that the voluntary arrangement prejudices his interests may be made after the arrangement has ceased to have effect, unless it came to an end prematurely.
(4) Where on such an application the Court is satisfied as to either of the grounds mentioned in subsection (1), it may—
(a) revoke or suspend any decision approving the voluntary arrangement which has effect under section 437 or, in a case falling within subsection (1) (b), any decision taken by the meeting in question which has effect under that section ; or
(b) give a direction to any person for the summoning of further meetings to consider any revised proposal, the person who made the original proposal may make or, in the case falling within subsection (1) (b), a further company or creditors’ meeting to reconsider the original proposal.
(5) Where after giving a direction under subsection (4)( summoning of meetings to consider a revised proposal the Court is satisfied that the person who made the original proposal does not intend to submit a revised proposal, the Court shall revoke the direction and revoke or suspend any decision approving the voluntary arrangement which has effect under section 437.
(6) Where the Court, on an application under this section with respect to any meeting—
(a) gives a direction under subsection (4) (b), or
(b) revokes or suspends an approval under subsection (4) ( the Court may give such supplemental directions as it deems fit and, in particular, directions with respect to things done under the voluntary arrangement since it took effect.
(7) Except as provided in this section, a decision taken at a meeting summoned under section 436 is not invalidated by any irregularity at or in relation to the meeting.
Section 441. A false representation, etc.
(1) If, for the purpose of obtaining the approval of the members or creditors of a company to a proposal for a voluntary arrangement, a person who is an officer of the company—
(a) makes any false representation, or
(b) fraudulently does, or omits to do anything, he commits an offence.
(2) A person who contravenes subsection (1), commits an offence and is liable on conviction to imprisonment for a term of one year or a fine as the Court deems fit or both.
Section 442. Implementation of proposal
(1) This section applies where a voluntary arrangement approved by the meetings summoned under section 436 has taken effect.
(2) The person who performs, in relation to the voluntary arrangement, the functions conferred by virtue of—
(a) the approval on the nominee, or
(b) section 435 (4) or 437 (3) on a person other than the nominee, shall be known as the supervisor of the voluntary arrangement.
(3) If any of the company’s creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, he may apply to the Court, and, on the application, the Court may—
(a) confirm, reverse or modify any act or decision of the supervisor ;
(b) give him directions ; or
(c) make such other order as it deems fit.
(4) The supervisor may apply to the Court for directions in relation to any particular matter arising under the voluntary arrangement, and is included among the persons who may apply to the Court for the winding-up of the company or for an administration order to be made in relation to it.
(5) The Court may, whenever it is—
(a) expedient to appoint a person to perform the functions of the supervisor, and
(b) it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the Court, make an order appointing a person who is qualified to act as an insolvency practitioner in relation to the company, either in substitution for the existing supervisor or to fill a vacancy.
(6) The power conferred by subsection (5) is exercisable so as to increase the number of persons performing the functions of supervisor or, where there is more than one person performing those functions, so as to replace one or more of those persons.
What this means
Short answer
A company voluntary arrangement is a proposal by the directors to creditors for a composition of debts or a scheme of arrangement, supervised by a nominee who must be an insolvency practitioner (section 434). Creditors and members decide at meetings (sections 436 to 438), and the arrangement binds everyone entitled to vote (section 439).
Who proposes it
The directors can propose to the company’s creditors a composition in satisfaction of its debts or a scheme of arrangement of its affairs. The proposal names a nominee to supervise it, and the nominee must be qualified to act as an insolvency practitioner for the company. Where an administration order is in force the administrator can make the proposal, and where the company is being wound up the liquidator can (section 434).
The nominee’s report
If the nominee is not the liquidator or administrator, he reports to the court within 28 days of notice of the proposal (or longer if the court allows), stating whether meetings of the company and its creditors should be summoned, and when and where. The person making the proposal gives him the terms of the proposed arrangement and a statement of the company’s affairs, with particulars of creditors, debts, liabilities and assets. If the nominee fails to report, the court can replace him (section 435).
The meetings
- If the court is told meetings should be summoned, they are summoned for the proposed time and place. A liquidator or administrator summons the meetings himself. Every creditor of whose claim and address the convener is aware is summoned (section 436).
- The meetings decide whether to approve the proposal, with or without modifications. Modifications can change the nominee but cannot stop it being a proposal under section 434 (section 437(1) and (2)).
- A meeting cannot approve anything that affects a secured creditor’s right to enforce his security without his agreement. It also cannot approve a proposal that pays a preferential debt otherwise than in priority to non-preferential debts, or pays one preferential creditor a smaller proportion than another, without that creditor’s agreement (section 437(3) and (4)).
- The chairman reports the result to the court and gives notice to the prescribed persons (section 437(6)).
Approval and effect
A decision has effect if both meetings took it, or if the creditors’ meeting took it where the court does not order otherwise. If the creditors’ decision differs from the company meeting’s, a member can apply to the court within 28 days, and the court can order the company meeting’s decision to have effect instead or make another order (section 438). A decision that has effect binds every person entitled to vote at the creditors’ meeting, whether or not he was present or represented, and everyone who would have been entitled had he had notice. If the company is being wound up or is in administration, the court can stay the winding up or end the administrator’s appointment to facilitate the arrangement (section 439).
Challenging a decision
A person entitled to vote at either meeting (or who would have been entitled to vote at the creditors’ meeting had he had notice), the nominee or his replacement, or the liquidator or administrator can apply to the court on the ground that the arrangement unfairly prejudices the interests of a creditor, member or contributory, or that there was a material irregularity at or in relation to a meeting. The application must generally be made within 28 days of the reports to the court. The court can revoke or suspend the decision or direct further meetings to consider a revised proposal. Otherwise, a decision is not invalidated by an irregularity at the meeting (section 440).
False representations
An officer who makes a false representation or fraudulently does or omits to do something to get the members’ or creditors’ approval commits an offence punishable by up to one year’s imprisonment or a fine, or both (section 441).
The supervisor
Once an arrangement takes effect, the person carrying out the nominee’s functions is the supervisor. A dissatisfied creditor or other person can apply to the court, which can confirm, reverse or modify the supervisor’s act or decision, give directions or make another order. The supervisor can ask for directions, can apply for the company’s winding up or for an administration order, and the court can appoint a substitute or an additional supervisor who is a qualified insolvency practitioner (section 442).
Questions and answers
Who can propose a company voluntary arrangement?
The directors, or the administrator if the company is in administration, or the liquidator if it is being wound up (section 434).
Who supervises the arrangement?
A nominee, who must be qualified to act as an insolvency practitioner. Once the arrangement takes effect he is called the supervisor (sections 434 and 442).
Can a voluntary arrangement override a secured creditor?
Not without that creditor’s agreement. A meeting cannot approve a proposal affecting a secured creditor’s right to enforce his security (section 437(3)).
How long do you have to challenge an approved arrangement?
Generally 28 days from the day the nominee’s reports were made to the court, on grounds of unfair prejudice or material irregularity (section 440).
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