Insolvency Act 1986, section 258

Approval of debtor's proposal

Part VIII Individual Voluntary Arrangements

[F604 (1)This section applies where under section 257 the debtor's creditors are asked to decide whether to approve the proposed voluntary arrangement.F604]

(2)The [F605creditorsF605] may approve the proposed voluntary arrangement with [F606or withoutF606] modifications, but shall not [F607approve it with modificationsF607] unless the debtor consents to each modification.

(3)The modifications subject to which the proposed voluntary arrangement may be approved may include one conferring the functions proposed to be conferred on the nominee on another person qualified to act as an insolvency practitioner [F608or authorised to act as nominee, in relation to the voluntary arrangementF608] .

But they shall not include any modification by virtue of which the proposal ceases to be a proposal [F608under this PartF608] .

(4)The [F609creditorsF609] shall not approve any proposal or modification which affects the right of a secured creditor of the debtor to enforce his security, except with the concurrence of the creditor concerned.

(5)Subject as follows, the [F610creditorsF610] shall not approve any proposal or modification under which—

(a)F611any preferential debt of the debtor is to be paid otherwise than in priority to such of his debts as are not preferential debts, ...

[F612 (aa)any ordinary preferential debt of the debtor is to be paid otherwise than in priority to any secondary preferential debts that the debtor may have,F612]

(b)a preferential creditor of the debtor is to be paid an amount in respect of [F613an ordinary preferential debtF613] that bears to that debt a smaller proportion than is borne to [F614another ordinaryF614] preferential debt by the amount that is to be paid in respect of that other debt [F615, F616...

(c)a preferential creditor of the debtor is to be paid an amount in respect of a secondary preferential debt that bears to that debt a smaller proportion than is borne to another secondary preferential debt by the amount that is to be paid in respect of that other debt.F615][F617 or

(d)if the debtor is a relevant financial institution (see section 387A), any non-preferential debt is to be paid otherwise than in accordance with the rules in section 328(3A) (reading references to the bankrupt as references to the debtor),F617]

F618However, the [F610creditorsF610] may approve such a proposal or modification with the concurrence of the ... creditor concerned.

F619(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) In this section “preferential debt” [F620 , "ordinary preferential debt” and “secondary preferential debt” each has F620] the meaning given by section 386 in Part XII; and “preferential creditor” is to be construed accordingly.

Definitions used in section 258 5

the debtor

(2) In Schedule 6 “the debtor” means the company or the individual concerned.

Defined in s.386(2) · see it in the full Act
consent

(3) But where the administrator has made a statement under paragraph 52(1)(b) “consent” means—

(a) consent of each secured creditor of the company, or

(b) if the administrator thinks that a distribution may be made to preferential creditors, consent of—

(i) each secured creditor of the company, and

(ii) the preferential creditors of the company.

Defined in Sch.B1 para.108(3) · see it in the full Act
ordinary preferential debts

(1A) A reference in this Act to the “ordinary preferential debts” of a company or an individual is to the preferential debts listed in any of paragraphs 8 to 15B of Schedule 6 to this Act.

Defined in s.386(1A) · see it in the full Act
secondary preferential debts

(1B) A reference in this Act to the “secondary preferential debts” of a company or an individual is to the preferential debts listed in paragraph 15BA , 15BB or 15D of Schedule 6 to this Act.

Defined in s.386(1B) · see it in the full Act
relevant financial institution

(1) In this Act “relevant financial institution” means any of the following—

(a)a credit institution,

(b)an investment firm,

(c)a financial holding company,

(d)a mixed financial holding company,

(da)an investment holding company,

(e)a financial institution which is—

(i)a subsidiary of an entity referred to in paragraphs (a) to (da), and

(ii)covered by the supervision of that entity on a consolidated basis by the Financial Conduct Authority in accordance with Part 9C rules or by the Prudential Regulation Authority in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms or CRR rules, or,

(f)a mixed-activity holding company.

Defined in s.387A(1) · see it in the full Act

Cases considering section 258 18

Whitehead v Household Mortgage Corpn plc

[2002] EWCA Civ 1657 · 14 November 2002

The court applied the restriction on approving a proposal affecting a secured creditor’s enforcement rights without that creditor’s concurrence. It reinforced the conclusion that a voting valuation and dividend claim did not itself affect HMC’s security.

Royal Bank Of Scotland Plc v Munikwa & Ors

[2020] EWHC 786 (Ch) · 3 April 2020Limits

Applies the provision identifying the purpose of the creditors’ meeting: deciding whether to approve the proposed voluntary arrangement. The meeting does not confer on the chair a power to disregard creditor modifications. (see para [38]) Interprets the requirement that creditors may approve a proposal with or without modifications, but may not approve it with modifications unless the debtor consents to each modification. The provision supports the conclusion that the debtor and creditors, not the chair, determine the effective modified proposal. (see paras [38]-[41]) Confirms that modifications may affect the nominee’s functions and are otherwise unrestricted, subject to the statutory exclusions and the requirement that the proposal remain within Part VIII. The provision leaves no general power to suppress conflicting fee modifications. (see paras [38]; [42]) Confirms that the exclusions in section 258(4) were non-material to the applications. The provision forms part of the statutory limits on permissible modifications. (see para [38]) Confirms that the exclusions in section 258(5) were non-material to the applications. The provision forms part of the statutory limits on permissible modifications. (see para [38])

Fehily & Anor v Atkinson & Anor

[2016] EWHC 3069 (Ch) · 1 December 2016Interprets

The court treated section 258(2) as requiring a debtor’s consent to each modification before an IVA could be approved with modifications. The court held that Re Plummer did not resolve whether incapacity affected an arrangement where the debtor had communicated consent but could not understand the proposal. (see paras [122]; [125])

1 more judgment, and what each says about section 258, are in the case-law panel in the full Act.

Amendments and notes

21 notes from legislation.gov.uk

Amendments

  1. F603S. 258 heading substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 65(6); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  2. F604S. 258(1) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 65(2); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  3. F605Word in s. 258(2) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 65(3); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  4. F606Words in s. 258(2) inserted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 65(4)(a); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  5. F607Words in s. 258(2) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 65(4)(b); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  6. F608Words in s. 258(3) substituted (1.1.2003) by 2000 c. 39, s. 3, Sch. 3 para. 9; S.I. 2002/2711, art. 2 (subject to transitional provisions in arts. 3-5)
  7. F609Word in s. 258(4) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 65(3); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  8. F610Word in s. 258(5) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 65(3); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  9. F611Word in s. 258(5)(a) omitted (1.1.2015) by virtue of The Banks and Building Societies (Depositor Preference and Priorities) Order 2014 (S.I. 2014/3486), arts. 1(2), 6(2)(a) (with art. 3)
  10. F612S. 258(5)(aa) inserted (1.1.2015) by The Banks and Building Societies (Depositor Preference and Priorities) Order 2014 (S.I. 2014/3486), arts. 1(2), 6(2)(b) (with art. 3)
  11. F613Words in s. 258(5)(b) substituted (1.1.2015) by The Banks and Building Societies (Depositor Preference and Priorities) Order 2014 (S.I. 2014/3486), arts. 1(2), 6(2)(c)(i) (with art. 3)
  12. F614Words in s. 258(5)(b) substituted (1.1.2015) by The Banks and Building Societies (Depositor Preference and Priorities) Order 2014 (S.I. 2014/3486), arts. 1(2), 6(2)(c)(ii) (with art. 3)
  13. F615S. 258(5)(c) and word inserted (1.1.2015) by The Banks and Building Societies (Depositor Preference and Priorities) Order 2014 (S.I. 2014/3486), arts. 1(2), 6(2)(d) (with art. 3)
  14. F616Word in s. 258(5)(b) omitted (19.12.2018) by virtue of The Banks and Building Societies (Priorities on Insolvency) Order 2018 (S.I. 2018/1244), arts. 1(2), 7(a) (with art. 3)
  15. F617S. 258(5)(d) and word inserted (19.12.2018) by The Banks and Building Societies (Priorities on Insolvency) Order 2018 (S.I. 2018/1244), arts. 1(2), 7(b) (with art. 3)
  16. F618Word in s. 258(5) omitted (19.12.2018) by virtue of The Banks and Building Societies (Priorities on Insolvency) Order 2018 (S.I. 2018/1244), arts. 1(2), 7(c) (with art. 3)
  17. F619S. 258(6) omitted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force) by virtue of Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 65(5); S.I. 2015/1329, reg. 3(d); S.I. 2016/1020, reg. 4(e) (with reg. 5) (as amended by S.I. 2017/363, reg. 3)
  18. F620Words in s. 258(7) substituted (1.1.2015) by The Banks and Building Societies (Depositor Preference and Priorities) Order 2014 (S.I. 2014/3486), arts. 1(2), 6(3) (with art. 3)

Modifications

  1. C925Ss. 256-263 applied (with modifications) by S.I. 1986/1999, art. 3, Sch. I Pt. III
  2. C926S. 258 modified (10.8.2005) by The Insurers (Reorganisation and Winding Up) Regulations 2004 (S.I. 2004/353), reg. 33(5) (as modified (10.8.2005) by S.I. 2005/1998, regs. 2(3), {40(1)-(4)(11)})
  3. C927S. 258 excluded (16.6.2016) by The Education (Postgraduate Masters Degree Loans) Regulations 2016 (S.I. 2016/606), regs. 1(1), 97(1)(c)