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Insolvency


CVA prejudicing landlord – Powerhouse

Summary

In these proceedings the creditors of PRG Powerhouse Ltd challenged the validity of a company voluntary arrangement (“CVA”) for Powerhouse which had been approved at a meeting of creditors. The High Court held that the CVA was effective to release Powerhouse’s parent company from liability in respect of guarantees provided by it to landlords of premises let to Powerhouse. The judge (Etherton J) went on to hold that the CVA therefore unfairly prejudiced the interest of the landlords as creditors of Powerhouse within the meaning of s6 of the Insolvency Act 1986

Section 6 of the 1986 Act

It is this section that gives the court the power to revoke a CVA where there is unfair prejudice to a creditor:
    "6(1) Subject to this section, an application to the court may be made … on one or both of the following grounds, namely –
      (a) that a voluntary arrangement … unfairly prejudices the interest of a creditor, member or contributory of the company;

      (b) that there has been some material irregularity at or in relation to either of the meetings.
    6(4) Where on such an application the court is satisfied as to either of the grounds mentioned in subsection (1) … it may do one or both of the following, namely –
      (a) revoke or suspend any decision approving the voluntary arrangement … or, in a case falling within subsection (1)(b), any deci ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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