Lorcan, a self-employed builder, proposes an individual voluntary arrangement (IVA) to his creditors. Which statement about the approval and effect of an IVA is correct?

Correct answer: D) It is approved if at least 75% in value of the creditors voting support it (subject to safeguards on connected creditors), and it then binds every creditor who was entitled to vote

Explanation

An IVA is approved if at least 75% in value of the creditors voting are in favour, but not if more than half of the total value of the unconnected creditors admitted for voting vote against it (Insolvency (England and Wales) Rules 2016, r15.34). Once approved, it binds every creditor who was entitled to vote, or would have been if they had had notice, whether they voted for or against or did not vote (s260 Insolvency Act 1986). It is a voluntary alternative to bankruptcy, so it is not imposed by the court after a bankruptcy order, and unanimity is not required.