www.iva.co.uk

Hi All,

A question for the experts!

We entered into a PVA at the end of March 07. Before the PVA was agreed we paid £7,500 in nominee’s fees to the IP. The proposal accepted by creditors shows that the nominees fees are to come out of the contributions providing the dividend of 85p in the £. Our first payment commenced on the 1st of April 07, with the agreement stating that we need to make contributions of £2500 over 5 years totaling £150k - providing our creditors with a return of 85p in the £.

To date we have made total payments of £22,500 (including the payment of the nominee’s fees). I am therefore of the opinion that we are not in arrears on the arrangement and that 3 more payments of £2500 will provide a total 12 month contribution of £30,000 inline with the terms of our proposal.

The IP of our PVA are threatening to fail our arrangement on the basis that we are 60 days in arrears. However, this threat excludes the fact that the nominees fees have been paid in full.

I would really appreciate you comments on this.

Regards

Carl

Hi
I tend to agree with you on this one,if your chairmans report states 60 payments of £2500 to include all fees then if you have paid three months upfront you are correct.The only other way to look at it is that you only make 57 monthly payments.
Wait until one of our IPs post and see what they have to say
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

I think that your IP is incorrect to say that you are in arrears, and I would point them towards their own proposal.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

Thanks Guys, I have now asked the IP to take a further look at the proposal and am awaiting their response.

I will let you all know the outcome!

Hi Guys

The IP are refusing to accept my views on this and have said that we either pay the arrears or they fail the arrangement and petition for our bankruptcy’s.

I maybe being cynical, but my belief is that our IP are demanding the money as they simply wish to use it for there own cash flow purposes.

I have spoken to two of our trade creditors in the VA and they both are happy that their return of 85p in the £ is based on all IP costs coming out of contributions.

My question is where do I go from here?

I'm struggling with the IPs position on this one. Seems odd. Unless there are other provisions, your legal obligations to contribute into the arrangement do not take effect until the arrangement is approved. From what you say you seem to be up to date with your obligations under the arrangement. For the IP to claim otherwise would suggest that the PVA went into default almost immediately it was approved, which would be nonsense of course.

There may be in the engagement letter a provision that they will get paid in advance of the creditors meeting but that is a private, contractual agreement between you.

I would suggest that you ask them to specify the grounds on which they claim that your obligations to contribute pre-date the approval of the PVA.

Ian

If the nominee's fee was pre-contractual, then it should not have featured in the dividend calculation. Someone appears to have got their numbers wrong here, and you should ask your IP to now produce a detailed statement of account to show you where they think the arrears arise from.

Hi Melanie,

I have argued this point exactly in an email to the IP I wrote:

"If the nominee’s fees were not to be taken from contributions, then I do not believe they should appear as deductions as outlined in appendix 4. I also believe that any document attached to a contract is legally binding and forms part of the agreement, and as such the creditors have agreed that nominees fees are deducted from contributions."

Their response was:

"Thank you for your email, I do not accept your argument with regard to the ‘advance payment of contributions’ and believe that we have made our position clear in this matter.

So that there is no misunderstanding you must bring all items listed in our letter of the 24 January 2008 up to date within the time frame specified if you wish to avoid the commencement of winding up proceedings"

All items refer to the arrears as mentioned in my initial post.

The main proposal refers to Appendix 4 to provide a breakdown of the creditors return based on agreement to the PVA compared with liquidation of the partnership. As already mentioned this clearly shows a return of 85p in the £ after, nominees fees, disbursments and supervisor fees are deducted.

I feel that I am being bullied into a corner here, with the IP using their authority to push us into their requests.

The IP were very supportive prior to the creditors meeting, however as soon as it was agreed they have been anything but supportive.

Melanie, if the IP does go ahead and attempt to fail the arrangement, would they first need to consult our creditors?

Thanks for your help.

Regards

Carl

Hi Carl

It is a little difficult to advise, when I do not have the full facts in front of me - ie a copy of your proposal, chairman's report and letter of engagement, but can you confirm the dates that you did make and have made payments to the IP firm. For them to say you are in arrears, there must have been a payment break at some stage.

Melanie,

Prior to entering into the PVA we actually paid a total of £8000 to the IP for their nominee’s fees. The proposal states to creditors that the nominee’s fees are expected to be paid in full prior to the creditors meeting, but should they not are the IP will take the balance as and when they like.

Since commencing the arrangement we have missed two payments, one after 4 months of entering into the PVA and another in November.

Nevertheless, we are still operating in the terms of our proposal as there is a 30+30 clause, which effectively means that providing we do not allow a payment to go beyond 60 days then the IP can not fail us.

The main reason for missing the payments is that on entering the arrangement we had a number of creditors that were not part of it as they had security on assets e.g. vehicles etc. nevertheless we were 4 months in arrears with several of these creditors and these had to be dealt with in order to avoid repossession.

Whilst in the recovery process, we have continued to restructure our business to improve our efficiency etc. Obviously, if we can put forward our case that the nominee fee payment should go down as advanced payments then it would give the business a much earned cash flow boost.

Overall the proposal we put forward to our creditors was very honest and provided the possibility of bonus contributions based on excess profit above our projections, which could ultimately provide a return of 100% to creditors.

If the proposal stated that the nominee's fees were to be paid in full prior to the IVA, then this would suggest that you are two payments in arrears if payments were missed post-IVA.

The arrears due to the vehicle finance companies should have been provided for within the original proposals. It is unfortunate that this was ommitted leaving you with the current difficulties. Can you pay anything towards those arrears, as even £100 will take you below the default amount.