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

Garnet Co's CVA was approved, but Hal, an unsecured creditor who was not given notice of the creditors' decision procedure, learns of it afterwards. Which statement is correct about Hal's position?

Hal is bound by the CVA even without notice, but he may apply to the court within the time limit to challenge it on grounds of unfair prejudice or material irregularity in the procedure. He cannot simply ignore it and sue for the full debt.

  1. AHal may apply to the court to challenge the CVA on the ground of material irregularity or unfair prejudice within the permitted timeCorrect
  2. BHal is not bound by the CVA because he did not receive notice, and can sue immediately for the full debt without any court application
  3. CHal has no remedy because a CVA approved by the majorities cannot be challenged

Explanation

A CVA binds every creditor entitled to vote, including one who lacked notice. However, a person affected may apply to the court on grounds of unfair prejudice or material irregularity in the procedure, within a limited time. Hal is therefore not free to ignore the CVA, but he is not without remedy either.

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