INS10437 - VA failure

Termination

Termination means an absolute cessation of an arrangement. It may occur when

• The VA is successfully completed
• An arrangement ends prematurely such as when
• A bankruptcy order is made based on the failure of an IVA on the petition of the supervisor, or
• A company winding up order is made based on the failure of a CVA on the petition of the supervisor
• The supervisor implements a termination clause advising creditors that the arrangement has terminated and that they are no longer bound by it
• The court makes a declaration to the effect that the arrangement has terminated (see Kings v Cleghorn 1996 BPIR).

Effect of termination.

In the moment termination occurs there is no longer any arrangement to bind creditors.

The role of the supervisor comes to an end, subject only to the distribution of funds in hand and sending creditors a final statement of receipts and payments.

If a bankruptcy or winding up order has been made

• Prove (claim) in the bankruptcy or liquidation for any unpaid balance of your pre-VA and any post-VA debts.

If no bankruptcy or winding up order has been made

The Recovery Office (IR) or Indirect Taxes can take distraint or County Court proceedings,

Debt Management and Compliance Service or Indirect Taxes can issue a statutory demand and petition for the balance of all pre- and post-arrangement debts.

Trusts

Trusts created or implied by the arrangement and which protect the VA fund, receipts and assets will survive termination if the arrangement expressly says so. Where it is silent about trusts they will cease.

Termination is rare

Unless there is a specific clause which authorises the supervisor to terminate the arrangement and tell the creditors that they are no longer bound by it but are free to pursue recovery of their debt the arrangement can only terminate following an insolvency order.

If you think you find a termination clause always seek confirmation from your Casework Manager or Process & Strategy Technical Adviser.