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

Echo Ltd's CVA proposal is put to its creditors. Under the usual rules, what level of approval by value of creditors voting is needed for the creditors to approve the proposal, and what additional safeguard applies?

Creditors approve a CVA by at least 75% by value of those voting. However, it is defeated if more than half by value of the unconnected creditors vote against it, which prevents connected creditors from forcing the arrangement through over independent creditors' objections.

  1. AAt least 75% by value of those voting, but it fails if more than half of the unconnected creditors by value vote againstCorrect
  2. BA simple majority by value of those voting, with no further safeguard
  3. CUnanimous approval by all creditors, whether or not they vote

Explanation

A CVA needs approval by at least 75% in value of creditors voting. The proposal is rejected if more than 50% in value of the unconnected creditors vote against it. This protects independent creditors from being outvoted by connected parties.

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