Chapter 5Non-corporate organisations – sole traders and partnerships3 This protects his property and stops the proceedings
for a bankruptcy order from carrying on. Also, secured
creditors are prevented from selling that property of
Fred’s on which the security has been taken, though any
scheme which is accepted cannot take away the rights of
secured creditors to be paid before unsecured creditors.
Still, an interim order will keep Fred’s property together
while a scheme is considered.
4 As part of obtaining an interim order, Fred must give
the name of a qualified insolvency practitioner (called a
‘nominee’) who is willing to act as a supervisor for the
proposed scheme. The court must be satisfied that:
(a)the nominee is properly qualified as an insolvency
practitioner and has stated in his report that he con-
siders that the arrangement has a reasonable prospect of
success; and
(b)Fred has not made a previous application for an
interim order in the last 12 months. Obviously, a debtor
cannot keep asking for these orders so as, perhaps
artificially, to put off bankruptcy proceedings. The nom-
inee will report to the court on the proposals in Fred’s
voluntary arrangement and if the court thinks that they
are reasonable it will direct the holding of a meeting
of creditors which the nominee will call. If 75 per cent
in value of the creditors entitled to vote attending the
meeting in person or by proxy approve the proposals by
voting for them, they will be binding on all creditors.
Under Sch 3 to the Insolvency Act 2000 an individual
voluntary arrangement binds allthe debtor’s creditors
including unknown creditors and they are only entitled
to the dividends under the arrangement and cannot sue
for the full debt or commence bankruptcy proceedings.
They may, however, apply to the court for relief on the
ground that their interests are unfairly prejudiced by the
arrangement.
The nominee, or another practitioner chosen by the
creditors, will supervise the arrangement. If it is honoured
the debtor, Fred, avoids bankruptcy and all the restric-
tions and publicity which go with it.
Under Sch 3 to the Insolvency Act 2000 an individual
may put a proposal for a voluntary arrangement to his
creditors without having to obtain an interim order.
Fast-track voluntary arrangements
(IVAs)
The Enterprise Act 2002 inserts ss 263A and 263G into
the Insolvency Act 1986 to provide for fast-track IVAs
103available only to undischarged bankrupts. The Insolvency
Act 1986 already allows post-bankruptcy IVAs but little
use has been made of the provisions. The new procedure
is designed to cut the costs of an ordinary IVA. It will
be used most often by consumer bankrupts who have
not properly considered the options pre-bankruptcy
and by professionals who discover that a bankruptcy
will affect their professional status and wish to have the
bankruptcy order annulled. If a post-bankruptcy IVA
comes into force, the bankruptcy will be annulled.
The fast-track procedure is as follows:
■The Official Receiver (a civil servant from the Official
Receiver’s Department (see below)) acts as nominee.
■He or she puts proposals to the creditors on a ‘take it
or leave it’ basis.
■There is no meeting of creditors and no opportunity
to propose amendments.
■When the Official Receiver as nominee communic-
ates with the creditors, he or she will have to explain
the circumstances in which the IVA will be regarded
as approved and ways in which creditors can object.
This will not be at a meeting, but will be done by
correspondence.
■If the IVA is approved under the Official Receiver’s
criteria, he or she will report the approval to the court
which will annul the bankruptcy order.
Following approval, the Official Receiver will act as
the supervisor of the arrangement. His fees as nominee
will be at a flat rate and may be cheaper than the fees
charged by professionals in the private sector. As sup-
ervisor the fees will be a percentage of the value of the
property sold or debts collected for distribution to cred-
itors under the scheme.The effect of a bankruptcy
order – generally1 If a scheme is either not put forward or, if put for-
ward, not accepted, the bankruptcy proceedings will, if
successful, end in the court making a bankruptcy order.
2 Once the order is made and Fred becomes bankrupt,
his property is automatically transferred to the control
of the Official Receiver. He is a civil servant dealing with
bankruptcy with the aid of a staff of suitably qualified
people. If Fred had put up a scheme of arrangement
which had failed to get acceptance, the ‘supervisor’ of