Insolvency Act 1986, section 5

Effect of approval

Part I Company Voluntary Arrangements

[F54 (1)This section applies where a decision approving a voluntary arrangement has effect under section 4A.F54]

(2)F55The ... voluntary arrangement—

(a)takes effect as if made by the company at the [F56time the creditors decided to approve the voluntary arrangementF56] , and

[F57 (b)binds every person who in accordance with the rules—

(i)was entitled to vote [F58 in the qualifying decision procedure by which the creditors' decision to approve the voluntary arrangement was madeF58] , or

(ii)would have been so entitled if he had had notice of it,

as if he were a party to the voluntary arrangement.

(2A)If—

(a)when the arrangement ceases to have effect any amount payable under the arrangement to a person bound by virtue of subsection (2)(b)(ii) has not been paid, and

(b)the arrangement did not come to an end prematurely,

the company shall at that time become liable to pay to that person the amount payable under the arrangement.F57]

(3)Subject as follows, if the company is being wound up or [F59is in administrationF59] , the court may do one or both of the following, namely—

(a)by order stay or sist all proceedings in the winding up or [F59provide for the appointment of the administrator to cease to have effectF59] ;

(b)F55give such directions with respect to the conduct of the winding up or the administration as it thinks appropriate for facilitating the implementation of the ... voluntary arrangement.

[F60 (3A)Where immediately before the voluntary arrangement took effect a moratorium for the company was in force under Part A1 and a petition for the winding up of the company, other than an excepted petition within the meaning of section A20, was presented before the beginning of the moratorium, the court must dismiss the petition.F60]

(4)The court shall not make an order under subsection (3)(a) [F61or dismiss a petition under subsection (3A)F61] —

(a)at any time before the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) [F62and (6A)F62] has been made to the court, or

(b)at any time when an application under the next section or an appeal in respect of such an application is pending, or at any time in the period within which such an appeal may be brought.

[F63 (5)Where the company is in energy administration, the court shall not make an order or give a direction under subsection (3) unless—

(a)the court has given the Secretary of State or the Gas and Electricity Markets Authority a reasonable opportunity of making representations to it about the proposed order or direction; and

(b)the order or direction is consistent with the objective of the energy administration.

(6) In subsection (5) “in energy administration” and “objective of the energy administration” are to be construed in accordance with Schedule B1 to this Act, as applied by Part 1 of Schedule 20 to the Energy Act 2004 . F63]

Definitions used in section 5 6

the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act
company

(4) In this Part “company” means—

(a)a company registered under the Companies Act 2006 in England and Wales or Scotland;

(b)a company incorporated in an EEA State ...; or

(c)a company not incorporated in an EEA State but having its centre of main interests in a member State (other than Denmark) or in the United Kingdom .

Defined in s.1(4) · see it in the full Act
party

(3) In section 72B(1) and this paragraph “party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.2A para.1(3) · see it in the full Act

(4) “Party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.ZA1 para.19(4) · see it in the full Act
any amount

(2) In sub-paragraph (1), the reference to “any amount” is subject to any regulations under section 99(1) of the Finance Act 2020 .

Defined in Sch.6 para.15D(2) · see it in the full Act
in administration

(a) a company is “in administration” while the appointment of an administrator of the company has effect,

Defined in Sch.B1 para.1(2) · see it in the full Act
administrator

1 (1) For the purposes of this Act “administrator” of a company means a person appointed under this Schedule to manage the company’s affairs, business and property.

Defined in Sch.B1 para.1(1) · see it in the full Act

Cases considering section 5 21

Tucker & Anor v Gold Fields Mining LLC

[2009] EWCA Civ 173 · 11 March 2009

The court treated section 5 as establishing that an approved CVA operates as a statutory contract binding the company and creditors entitled to vote, including creditors who lacked notice of the meeting. That context supported construing paragraph 23.5 as applying across creditor classes. (see paras [19], [36]–[38])

Thomas v Ken Thomas Ltd

[2006] EWCA Civ 1504 · 9 October 2006Interprets

The court construed the binding effect of an approved arrangement as replacing the landlord’s claim to included rent with rights under the arrangement. The replaced rent could no longer support forfeiture. (see paras [33]; [40]-[48]) The binding substitution effected by an approved arrangement meant that included rent ceased to be owing as rent. The landlord retained the proprietary right of re-entry but could not exercise it for the replaced debt. (see paras [42]-[48])

In re NT Gallagher & Son Ltd (Shierson v Tomlinson, NT Gallagher & Sons Ltd v Howard)

[2002] EWCA Civ 404 · 26 March 2002Defines

An approved arrangement binds every creditor who had notice and voting entitlement as though that creditor were a party. The court treated the arrangement as a statutory contract capable of binding dissentients and non-voters.

1 more judgment, and what each says about section 5, are in the case-law panel in the full Act.

Amendments and notes

17 notes from legislation.gov.uk

Amendments

  1. F54S. 5(1) substituted (1.1.2003) by 2000 c. 39, s. 2, Sch. 2 Pt. I para. 6(a); S.I. 2002/2711, art. 2 (subject to transitional provisions in arts. 3-5)
  2. F55Words in s. 5(2)(3) repealed (1.1.2003) by 2000 c. 39, ss. 2, 15, Sch. 2 Pt. I para. 6(b), Sch. 5; S.I. 2002/2711, art. 2 (subject to transitional provisions in arts. 3-5)
  3. F56Words in s. 5(2)(a) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force, 6.4.2019 for S. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 6(2)(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); S.I. 2019/816, reg. 4(c) (with reg. 5)
  4. F57S. 5(2)(b)(2A) substituted (1.1.2003) for s. 5(2)(b) by 2000 c. 39, s. 2, Sch. 2 Pt. I para. 6(c); S.I. 2002/2711, art. 2 (subject to transitional provisions in arts. 3-5)
  5. F58Words in s. 5(2)(b)(i) substituted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force, 6.4.2019 for S. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 6(2)(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); S.I. 2019/816, reg. 4(c) (with reg. 5)
  6. F59Words in s. 5(3) substituted (15.9.2003) by 2002 c. 40, ss. 248(3), 279, Sch. 17 para. 11(a)(b) (with s. 249(1)-(3)(6)); S.I. 2003/2093, art. 2(1), Sch. 1 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))
  7. F60S. 5(3A) inserted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 3 para. 6(2) (with ss. 2(2), 5(2))
  8. F61Words in s. 5(4) inserted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 3 para. 6(3) (with ss. 2(2), 5(2))
  9. F62Words in s. 5(4)(a) inserted (26.5.2015 for specified purposes, 6.4.2017 for E.W. in so far as not already in force, 6.4.2019 for S. in so far as not already in force) by Small Business, Enterprise and Employment Act 2015 (c. 26), s. 164(1), Sch. 9 para. 6(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); S.I. 2019/816, reg. 4(c) (with reg. 5)
  10. F63S. 5(5)(6) inserted (5.10.2004) by Energy Act 2004 (c. 20), ss. 159(1), 198, Sch. 20 para. 43; S.I. 2004/2575, art. 2(1), Sch. 1

Modifications

  1. C92Ss. 1-7B applied (with modifications) (E.W.) (15.3.2024) by The Water Industry (Special Administration) Regulations 2024 (S.I. 2024/205), regs. 2(2), 5(1), 43-45 (with reg. 64)
  2. C93Ss. 2-6 applied (with modifications) by 2009 c. 1, s. 154(3A) (as inserted (13.3.2018) by The Small Business, Enterprise and Employment Act 2015 (Consequential Amendments, Savings and Transitional Provisions) Regulations 2018 (S.I. 2018/208), regs. 1(3), 5(6)(c))
  3. C98S. 5 restricted (S.) (1.11.2001) by 2001 asp 10, s. 63, Sch. 7 para. 10(5); S.S.I. 2001/336, art. 2(3), Sch. Pt. II (subject to transitional provisions and savings in art. 3)
  4. C99S. 5 modified (1.10.2011) by Postal Services Act 2011 (c. 5), ss. 73, 93(2)(3), Sch. 10 para. 43; S.I. 2011/2329, art. 3 (with arts. 4, 5)
  5. C100S. 5 modified by S.I. 2012/3013, Sch. 2 para. 36 (as inserted (4.7.2018) by The Insolvency of Registered Providers of Social Housing Regulations 2018 (S.I. 2018/728), regs. 1, 3(6), Sch. 2)
  6. C101S. 5 modified (5.7.2018) by Housing and Planning Act 2016 (c. 22), s. 216(3), Sch. 5 para. 42; S.I. 2018/805, reg. 3(b)
  7. C102S. 5 restricted by 2010 asp17, s. 103 (as substituted (8.3.2019) by Housing (Amendment) (Scotland) Act 2018 (asp 13), ss. 6(11), 11(2); S.S.I. 2018/253, reg. 2(2))