formal and informal arrangements

• What are the different options for a company in financial difficulties?

  Informal agreements, pre-insolvency moratorium, company voluntary arrangements, and restructuring plans
• Why might a company choose to negotiate informal agreements with creditors?

  To avoid the time and cost of formal insolvency arrangements
• Are informal agreements regulated by insolvency statutes?

  No, they are not regulated by IA 1986 or CIGA 2020
• What is a Standstill Agreement?

  It is an agreement where creditors refrain from enforcing their rights for a specified period
• What does CIGA 2020 introduce for struggling companies?

  A new pre-insolvency moratorium
• What is the purpose of a pre-insolvency moratorium?

  To provide time for a company to reach an informal agreement with creditors
• What actions are restricted by a moratorium?

  No creditor can enforce security against the company's assets
• How long does a pre-insolvency moratorium last?

  20 business days, extendable by directors for another 20 days
• What debts must still be paid during the pre-insolvency moratorium?

  Monitor's remuneration, goods and services supplied, rent, wages, and loans
• What is a Company Voluntary Arrangement (CVA)?

  A compromise between a company and its creditors for debt repayment
• Who supervises a CVA?

  An Insolvency Practitioner known as a Supervisor
• What is required for a CVA proposal to be approved?

  At least 75% in value of unsecured creditors must vote in favor
• What happens if a CVA is approved?

  It becomes binding on all unsecured creditors
• How are CVAs commonly used in the retail sector?

  To reach compromises with creditors, particularly landlords
• What is the role of the Supervisor in a CVA?

  To agree creditors’ claims and ensure compliance with the CVA
• What is the purpose of the Restructuring Plan introduced by CIGA 2020?

  To compromise a company’s creditors and restructure its liabilities
• What is required for a Restructuring Plan to become binding?

  The court must sanction it
• What are the key differences between a CVA and a Restructuring Plan?

  CVA:

  • Initiated by directors, liquidators, or administrators
  • Requires 75% approval from unsecured creditors
  • Does not bind secured creditors without consent

  
  

  Restructuring Plan:

  • Can be initiated by various parties including creditors
  • Requires court sanction
  • Binds all creditors including dissenting ones
• What is a cross-class cram down in the context of a Restructuring Plan?

  It allows one class of creditors to force the Plan on another class
• What are the advantages and limitations of a CVA?

  Advantages:

  • Quick and less costly to implement
  • Directors remain in control

  
  

  Limitations:

  • Secured and preferential creditors not bound without consent
  • No court approval required