Changes have been made to SIP 3.2 (CVA) which came into effect on 1 April 2021. The changes call for IPs to be objective in each role associated with the CVA and extensive additions have been made in relation to proposals. We have set out below the key amendments in relation to certain stages of the CVA.
Initial meeting with directors
Due to Covid-19 measures, IPs are no longer required to conduct the initial meeting with directors face-to-face. The meeting should now be conducted in person (whether at a physical meeting or using conferencing technology).
IPs must also advise the directors on whether the company will require additional specialist assistance which will not be provided by the supervisor (and the likely costs).
The IP should be able to evidence the advice he has given to the directors as to the advantages and disadvantages of the options, and have a detailed note of the strategy outlining these options, which now include the impact of trading within a CVA for a prolonged period and the continued viability of the business during that period.
IPs must also maintain a record of discussions with directors, which now must include its explanation of the roles of the nominee and supervisor.
Preparing for the CVA
IPs must ensure that, when preparing for a CVA, creditors are given adequate time to consider what is being planned. The IP should flag sources of help to the creditors when the creditors need assistance in understanding the consequences of the CVA.
The new SIP also contains new guidance as to the contents of the proposal itself. The proposal must now contain the following additional information:
- any additional specialist assistance which the company may require and why that assistance may be necessary
- details of any other attempts to solve the company’s financial difficulties; these should include the alternatives considered
- if relevant, sufficient information to support any profit and cash projections, subject to any commercial sensitivity
- an explanation of the role and powers of the supervisor
- details of what discussions have taken place with creditors
- where relevant, an explanation as to how and why certain creditors are to be treated differently
- an explanation of how debts are to be valued for voting purposes, in particular where the creditors include long term or contingent liabilities
- the proposed remuneration of the nominee, supervisor and the cost of any other additional specialist assistance
- an explanation of how debts will be treated in the event of the CVA failing and the subsequent effects of the company and remaining assets.