UK Law and Practice Contributed by: Kate Stephenson and Zoe Stembridge, Kirkland & Ellis
CVA Supervisor The CVA supervisor is appointed by creditors in a CVA to oversee the implementation of the arrange - ment agreed between the company and its creditors. Moratorium Monitor This is a licensed insolvency practitioner appointed during a moratorium, to protect creditors’ interests. The directors otherwise continue to run the business. The monitor must bring the moratorium to an end if rescue of the company is no longer likely or if the company is not paying debts it must pay within the process. Receivers and Administrative Receivers These are appointed by secured creditors to protect and manage secured assets. Their primary duty is to act in the interest of the appointing secured creditor; they have limited duties to other creditors. These are creditors with security over the debtor’s assets, which may be a fixed or floating charge secu - rity (or both). Fixed charge holders have sole entitle - ment to the proceeds of assets over which a fixed charge has been granted (until their debt has been discharged in full), subject to paying the costs of reali - sation. Preferential Creditors Preferential creditors include certain limited employee claims and the UK tax authority (HMRC) in respect of certain tax debts, including value added tax and “pay These are creditors that do not have any security and are not preferential under statute. Unsecured creditors are entitled to share in the prescribed part carved out of the proceeds of floating charge realisations, which is made available to satisfy unsecured debts, up to a cap of GBP800,000. 2. Creditors 2.1 Types of Creditors Secured Creditors as you earn” (PAYE). Unsecured Creditors
General Ranking On the insolvency of a debtor, the proceeds from the realisation of assets must be distributed, in simple terms, as follows: • fixed charge holders (to the extent of the realisa - tions from the secured assets, minus costs of realisation); • expenses in the insolvency proceedings (these include the officeholder’s fees and expenses, as well as new liabilities that the officeholder causes the debtor to incur during the insolvency process); • preferential creditors; • prescribed part distribution to unsecured creditors; • floating charge holders (to the extent of the reali - sations from the secured assets, minus costs of realisation and the prescribed part noted above); • unsecured creditors; • statutory interest on provable debts; • subordinated creditors (where appropriately worded); and Subject to the above order of priority, subordinated creditors are ranked according to the terms of the subordination language in the relevant documenta - tion. There is no concept of equitable subordination in England and Wales. 2.2 Priority Claims in Restructuring and Insolvency Proceedings No claims have priority over secured creditors with fixed charge security. However, the following claims have priority over creditors with floating charge secu - rity: • prescribed fees and expenses of the official receiver (if applicable); • shareholders. Subordination • unpaid moratorium debts and unpaid priority pre- moratorium debts, where proceedings are begun within 12 weeks following the end of a (standalone) moratorium proceeding; • expenses of the proceedings (ie, the fees and costs incurred by the insolvency practitioners in managing the insolvency process); • ordinary preferential debts owed by the insolvent company in relation to:
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