Lloyd's Maritime and Commercial Law Quarterly
INDIVIDUAL VOLUNTARY ARRANGEMENT
Fidelis Oditah*
The individual voluntary arrangement (“IVA”) was introduced into our insolvency law for the first time by the Insolvency Acts 1985 and 1986, on the recommendation of the Cork Committee. A voluntary arrangement is a composition in satisfaction of the debts of an insolvent individual or a scheme of arrangement of his affairs. Unlike a company voluntary arrangement or a deed of arrangement under the Deeds of Arrangement Act 1914, the debtor and his property are protected from creditors during the time that an interim order is in force. A number of questions have arisen for which no answer appears to be provided by the Act, such as: the entitlement of partly secured creditors to vote; the treatment of contingent and other unquantified claims; the treatment of landlords; the treatment of fluctuations in the value of security for purposes of voting and dividend; and whether creditors to whom notices of meeting were sent but who never received them are bound by an IVA. These and other questions are addressed in this article.
Introduction
A financially distressed individual could in most cases stave off formal bankruptcy by proposing to his creditors (a) an arrangement under the Deeds of Arrangement Act 1914; or (b) a voluntary arrangement under the Insolvency Act 1986. An arrangement under the Deeds of Arrangement Act 1914 is an instrument under which creditors of a financially distressed debtor agree to accept a dividend in full and final settlement of their claims or to accept a dividend on such terms and subject to such conditions as may be set out in the composition.1 The instrument must be (i) registered2 and (ii) assented to by a majority in number and value of creditors.3 This method of coming to terms with one’s debts replaced the common law composition, which had existed for a considerable period and has the advantage that, since it does not require any application to the court, it avoids the costs and delay inherent in a more formal procedure. Besides, creditor participation is encouraged. For contract lawyers the central issue in compositions under the 1914 Act is identifying the consideration which the debtor provides for the agreement of
* Travers Smith Braithwaite Lecturer in Corporate Finance Law, University of Oxford, and Fellow of Merton College.
1. Deeds of Arrangement Act 1914, s. 1(2).
2. Ibid., s. 2.
3. Ibid., s. 3.
210