Unsuccessful challenge to CVA

The Applicant, a creditor, applied to revoke or suspend a Company Voluntary Arrangement (CVA) primarily on the basis that another creditor’s debt should not have been admitted for voting purposes.

The court rejected the challenge and criticised the Applicant for undertaking a fishing expedition and refusing to accept the amount and validity of debts owed to the company’s current and former shareholders.

It was held that a creditor challenging a debt owed to another creditor was not entitled to demand full original documentation on every aspect of the debt. Further, it is not the function of the court to carry out a detailed audit to satisfy itself beyond any doubt at all that a debt put forward for voting purposes is properly owed in the quantum put forward.

The court (and a chairman of a meeting) is entitled to rely on the balance of probabilities and the evidence put before it. A person challenging the admission to proof is not entitled to assert that “something may turn up” or suggest that the burden of proof has shifted to those relying upon the vote.

The applicant should also have joined the other creditor to the proceedings and had failed to do so.

Richmondshire District Council v Dealmaster Ltd [2021] EWHC 2892 (Ch)

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