Enforcement action: distraint: after the levy: Voluntary Arrangements (VAs) following levy
The effect of a VA on recovery
An approved voluntary arrangement allows a debtor to come to a formal composition arrangement with their creditors. They may be:
- company (or corporate) Voluntary Arrangements (CVA)
- individual voluntary arrangements (IVA) and
- partnership voluntary arrangements (PVA)
The most common of these are CVAs and IVAs.
Debtors go into VA following approval at a creditor’s meeting.
Intent to delay
A debtor may say he intends to seek a VA when they may have no intention of doing so just to frustrate creditors. If a debtor claims they are proposing to go into VA after you have levied and you have any doubts ask for the name of the Nominee or prospective Supervisor.
You should then contact the insolvency practitioner (within the constraints of confidentiality) and ask if they are indeed preparing an application for an Interim Order or proposals for a VA on the debtor’s behalf.
If the insolvency practitioner confirms the position, suspend your distraint as above.
The directors of small, eligible companies (which are not already in liquidation or administration) may precede the creditor’s meeting by obtaining the protection of a moratorium. This means during the period the moratorium is in force that no proceedings, including distraint, may be taken against the company except with the leave of the court.
Individuals generally apply for an Interim Order (IO) through the courts prior to the creditor’s meeting. This, if successful, has the effect of staying any distraint and preventing a new action.
Companies and individuals
Where, following an incomplete distraint, you or the auctioneer discover that the directors of a company or a sole debtor has applied for a moratorium or IO with the intention of going into VA:
- suspend but
- do not abandon your distraint.
If the case is with the auctioneer he should retain the papers.
If the application for the moratorium or the IO is successful:
- continue to suspend the levy
- await the outcome of the creditor’s meeting.
If the proposals are accepted and a VA is granted, withdraw your distraint.
Application unsuccessful / proposals rejected
If the application for a moratorium fails or the subsequent proposals for an individual or corporate VA are rejected at the creditor’s meeting, complete your distraint.
Partnership voluntary arrangements (PVA)
These are unusual as the partners normally go into individual VAs but it is possible for a partnership to go into VA as if it were an unlimited company under the Insolvent Partnership Order 1994.
This situation will normally only affect joint debts such as PAYE and NIC and, exceptionally, legacy debts. You should normally treat them as if they were Company VAs.