Skip to content

ACCA Applied Skills · Corporate and Business Law (Global) · Insolvency and administration

Dalby Ltd's CVA was approved by the required majority of creditors. Joel, an unsecured creditor, voted against it and is unhappy with its terms, which pay him 40 cents in the dollar. The company has complied with all procedures. Which statement is correct?

Joel is bound by the approved CVA even though he voted against it, but he may apply to court to challenge it on the grounds of unfair prejudice or material irregularity in the procedure. He cannot simply opt out or demand full payment.

  1. AJoel is bound by the CVA but may apply to court on grounds of unfair prejudice or material irregularityCorrect
  2. BJoel is not bound because he voted against the proposal
  3. CJoel is bound and has no right of challenge in any circumstances
  4. DJoel may enforce full payment of his debt outside the CVA because the company is still trading

Explanation

An approved CVA binds all creditors entitled to vote, including those who dissented. A creditor may, however, apply to court within a limited period to challenge on the grounds of unfair prejudice or material irregularity in the procedure. Saying he is not bound, or has no remedy, is wrong, and he cannot pursue full payment outside the arrangement.

Did you get it right without looking?

One question tells you little. A timed set on Insolvency and administration shows your real accuracy, how long you take and where you lose marks.

Practise Insolvency and administrationFree diagnostic mock

More Insolvency and administration questions