INS10119 - About the Voluntary Arrangements Service

The rescue culture: when to reject and what to say

When to reject

Rejection is appropriate when

• debtors do not resolve VAS genuine concerns about their proposals
• debtors do not expect to meet all statutory liabilities as they fall due.

Occasionally exceptional or compliance reasons will cause VAS to decline proposals. Examples are

• deliberate default or evasion of statutory liabilities
• past association with contrived insolvency
• operating a policy of withholding payment of Crown money
• any proposal that requires sale of HMRC debt or does not provide cash
• failure to meet any obligations under a prior VA
• exclusion of creditors who are entitled to receive the same treatment as all others within their class
• a purchaser assuming responsibility for payment of some of the debtor’s debts in consideration for the purchase of the debtor’s assets
• any proposal by any member of any organisation that requires debts owed to its members to be paid in full, whether inside or outside the arrangement or before or after completion of the arrangement when all other unsecured creditors will become bound to accept a compromise of their debt. Here ‘members’ includes any prescribed associate(s) or other creditor(s) specified by the organisation.

What to say

Reasons for rejection will be

• the absence of full disclosure
• the offer does not provide the best possible achievable result (‘optimised’, see INS10167)
• there is no provision for payment of future tax as it arises
• an unacceptable compliance history ( INS10261)

• You may disclose confidential compliance history to a nominee or supervisor—all the while they are the office-holder.

Before rejecting—think commercially – vote tactically.

• Be prepared to contact other large unconnected creditors to learn how they view the offer, what improvement they will seek, and how they will vote.
• Lodge a rejection proxy in time to allow the debtor and nominee to reconsider their position if your vote is more than 25% and will reject the proposals.
• Support with modifications improving upon the offer but do not make your acceptance conditional upon their approval when your share of the vote is small the proposal will otherwise be approved and there are no compliance or exceptional issues.

It is better to be tied into a partly improved arrangement than a wholly unsatisfactory one.

Sometimes you will aid the approval of a poor arrangement but that is a commercial risk VAS is prepared to take.

Collect all you can by being cost-effective and commercial.