INS10217 - Steps a debtor takes

Second VAs: original still existing

Proposals for second Voluntary Arrangements are not unusual. They intend either that

Both VAs operate independently

The VAs must

• operate independently of each other
• have separate creditors and
• have separate VA funds.

• Consider the proposal for the second independent arrangement in the normal way, although poor history or conduct of the original arrangement may be taken as grounds for rejection because of non-compliance.

Both VAs combine under the second VA

Creditors and assets of the original VA will combine with

• new creditors and
• assets under a second VA
• but there will be only one VA fund.

Non-preferential creditors often support them because they will eliminate the preferential status of creditors under the original arrangement unless the original preferential creditors modify it to allow preferential creditors under the old and new arrangements to rank equally. But such proposals tend to be legally flawed because the debts of first arrangement creditors used to approve them are

• Still bound within the original arrangement
• Not free to vote for a second VA.

Only if the original arrangement has legally terminated or been legitimately varied at the same time as the second proposal was approved can this combination arrangement be legitimately approved.

When you consider a second VA proposal it is essential that you confirm whether

• The original VA has terminated ( INS10437) or
• Is still extant (existing).

If the original VA has terminated

• Consider the second VA in the normal way.

But poor history or conduct of the original arrangement may be taken as grounds for rejection because of non-compliance.

If the original VA still exists

• Tell the nominee under the second proposal and the supervisor of the original proposal that debts of the first arrangement creditors are not free to vote and that the VA fund is ring-fenced for the benefit of first arrangement creditors.
• Ask for an immediate dividend on preferential and non-preferential claims.
• Warn that you will hold both personally responsible for any losses or costs to HMRC if a second arrangement is wrongly approved.