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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

12 JUN 2012

Individual Voluntary Arrangements - Preface to Update 28

Paul French

Guildhall Chambers

A quiet time for black-letter law as far as Individual Voluntary Arrangements (IVA) are concerned, but a few practical points to note, regarding the three Ps: Paymex, PPI and Protocol.

When the Paymex guidance went out from R3 and the RPBs in January 2012, the tenor of the advice was that, if at all possible, IPs should keep open IVAs while determining the exact status of the potential VAT reclaim and the destination of the benefit of the refund. This was in order to keep open the possibility of a supervisor exercising a commercial discretion, such a discretion not being open to a former supervisor in a closed case, who would be in a position of trustee (properly so-called) rather than an office-holder. Reports suggest that some practitioners have taken this rather too literally, and are holding open cases until the refund is received. That was not the intention. Once it is determined how the refund claim is to be made (if, indeed, such a claim is worthwhile) and the benefit to be derived, it seems to me that the IP should then proceed to close the case. There are scores of debtors who have paid all the monthly contributions required of them under their IVAs, but have yet to receive their completion certificates effectively discharging them from the debts comprised within the IVA. The extension of the IVA also exposes the debtor to the risk of an after-acquired property clause being invoked, in respect of a windfall or inheritance arising some time after the debtor should reasonably have expected to have received his completion certificate. Such an exposure is hardly fair, when the debtor has done everything expected of him, yet his completion certificate has been delayed by the impact of a VAT Tribunal decision that has nothing to do with him. I am firmly of the view that, once the appropriate decision has been made by the IP as to what is the position, the case should proceed to closure in the normal way, and not await physical receipt of the refund (which, as much as anything else, depends on the resources of Her Majesty's Revenue & Customs). And I know that was the intention of the guidance, because it was based on my advice.

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