allow creditors with interests that are liable to be prejudiced by a CVA to challenge the approval of the CVA or the process followed in such approval.

It might be questioned whether there is any purpose in providing for a members’ meeting when the CVA can be approved by the creditors’ meeting on its own.163 Such a meeting does, however, provide shareholders with a forum and a route to information and discussion that would otherwise be lacking. Such a meeting, moreover, might, in some situations, alert shareholders to issues of potential prejudice of which they were unaware. It can be supported on that basis.

Conclusions

CVA procedures have been enhanced by the moratorium164 but, in concluding this discussion, it is worth emphasising that legal provisions on CVAs can only go so far in effecting corporate rescues. The CVA does offer a reasonably accountable and fair mechanism for rescue but residual concerns must relate to the degree of co-ordination between directors and IP supervisors that any particular CVA will involve; the absence of provisions advertising proposed CVAs; whether a regime for superpriority funding is necessary for effective rescue; and whether training for directors is a prerequisite for effective rescue.

If seen in broader terms, the CVA procedure can be said to be based on a ‘forum’ approach to insolvency: one that operates on the basis that rescues can be negotiated into existence. This approach assumes that creditors will produce mutually acceptable solutions if all possibilities can be discussed openly and at low cost. This notion is open to criticism by those who see conflicts of interest as looming large in insolvency. From this perspective, it might be argued that the CVA is unlikely ever to offer the most popular or effective route to rescue because in most areas of corporate trouble the creditors tend to have such divergent interests and powers that rescue options are most likely to be arrived at by degrees of imposition rather than negotiation.

Drawing such a contrast suggests that a way to improve rescue prospects through CVAs may be to institute changes that will reduce the divergences of interest (or perceived divergences of interest) between different creditor groupings. How, though, can this be done consistently

163Phillips, Administration Procedure, p. 24.

164Introduced by the Insolvency Act 2000.

with allowing financing options to remain flexible? One route forward may be to revise the legal rules so that oppositions of interest are less starkly drawn. This can be done, for example, by offering more information to unsecured creditors or by opting for courses of action that favour unsecured creditors where this involves no cost to the charge holder. Another route would be to institute changes not through legal adjustments of interest but by measures designed to change the cultures, values and assumptions of involved parties: to encourage banks, for example, to identify their own long-term interests more closely with those of the body of unsecured creditors and employees.

Arguing from a further perspective, it might be contended that what really affects prospects of rescue is not so much the legal process involved, or the arrays of interests encountered, but the levels of business skill that are involved. Reforms reflecting this point of view could focus on continuing steps designed to enhance the skill levels of nominees and supervisors as well as those of directors. Improvements here might be secured through increased attention to training and the qualifications necessary for adopting any of the normal named roles. The measures might be constituted on a mandatory or a voluntary basis.

At this point we should return to a question posed earlier in relation to section 895 schemes of arrangement: is there a case for retaining these when resort can be made to CVAs or administration? The Company Law Review Steering Group suggested, as noted, that there would be strong support for a process allowing company managers to impose reorganisation proposals on a minority165 and it is arguable that there are circumstances in which internally generated reforms may produce rescues more efficiently, expertly, accountably and fairly than procedures involving external practitioners. A streamlined version of the existing schemes of arrangement procedure may have a place in modern company law. Where the troubled company happens to be managed by directors who are able to initiate turnarounds and where these directors are able to see the need for such steps before prospects of rescue have become minimal, the scheme of arrangement has a valuable role. Again this raises the issues of directorial training and incentives within the insolvency process.

Finally, it should be noted that schemes of arrangement and CVAs are both procedures that operate with distinct visions of the insolvency process in mind – ones that make numerous assumptions about the

165 CLRSG, Completing the Structure, p. 205.