Essential points 325off creditors. He can sell off property which is subject to a floating charge but the charge
holder gets the same priority in respect of any property then acquired. In effect, this
reverses the crystallisation of the charge. By court order he can sell off property subject to a
fixed charge, but only if the charge holder has made available to him the net proceeds of
sale and any other sum which the court thinks would bring the amount up to the market
value of the charged property.
Company voluntary arrangement (CVA)
The directors of an insolvent company can propose a scheme of arrangement to be super-
vised by an insolvency practitioner. Under such an arrangement, which must be agreed by
a three-quarters majority of the company’s unsecured creditors, all unsecured creditors are
paid a proportion of their debts over a period of time. This can be done even if the company
is in liquidation or administration.
Meetings of all company creditors and all members must be called. These meetings
can approve the proposal or a modification of it. However, the meetings cannot deprive a
floating charge holder of the right to enforce his security without that creditor’s approval.
Nor can the priority of preferential debts be changed without the approval of the pre-
ferential creditors who would be affected. If a proposal is approved at the meetings, notice
must be given to all the members and creditors who were invited to the meetings and to
the court. All members and creditors are then bound by the agreement. If the meetings come
to different results, the meeting of the creditors prevails. However, any member then has
28 days to apply to the court to have the decision of the creditors’ meeting changed or
overruled.
Within 28 days of receiving notice of the proposal, any creditor or member can apply to
the court to have the proposal set aside on the grounds that it unfairly prejudices the inter-
ests of a creditor or member, or that there was a material irregularity at the meeting. The
court then has the power to approve, revoke or suspend the approval and to direct that
revised proposals be put to another meeting.
Voluntary arrangement is an insolvency procedure but not a liquidation procedure. It
is generally hoped that the company can survive it. Individuals may enter into a similar
procedure, known as an individual voluntary arrangement or IVA.
Essential points
Directors
n The board of directors of a company have all the power to manage the company.
n The members of a company have the power to elect the directors, but do not have the
power to manage the company.
n A director of a company can always be removed by an ordinary resolution of the
members, of which special notice has been given.
n Directors have seven statutory general duties.
Shares, meetings and resolutions
n Companies may issue different classes of shares, with different rights attaching to
the various classes.