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IVA : Block Voting by Creditors.
To apply for an Individual Voluntary Arrangement (IVA), a person needs to approach their creditors, through an Insolvency Practitioner, with an offer of repayment which, based on their personal circumstances, is the best offer they can afford to make.
The decision as to whether the Individual Voluntary Arrangement (IVA) will be accepted by the creditors is made at a 'Creditors Meeting'.
There are rules in place to balance the power of each of the creditors votes. The creditor who is owed the largest amount has the strongest vote.
For the Individual Voluntary Arrangement (IVA) proposal to be agreed at the Creditors Meeting, and therefore become legally binding, there must be in excess of 75% (of the monetary value) of votes cast 'in favour' of the Individual Voluntary Arrangement (IVA) by the creditors.
This rule limits the power of creditors who hold the smaller value debts in the Individual Voluntary Arrangement (IVA) proposal, because if one creditor is owed 24% or less of the total debt, but does not want to accept the Individual Voluntary Arrangement (IVA) as a new agreement, they are reliant on another creditor also not wanting to accept the Individual Voluntary Arrangement (IVA) proposal, to give them enough voting strength to block the Individual Voluntary Arrangement (IVA) from being accepted.
When two creditors join forces in this way, it is referred to as Block Voting.
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