5 Steps to IVA

We work with Yip, Tse & Tang Solicitors which is a leading solicitors firm offering legal and advisory aspects of IVA service to debtors. They have accumulated wealthy experience and knowledge on personal insolvency through conduct on bankruptcy cases. They have represented a number of debtors in applying to the Court for interim order , negotiating with creditors for compromise and attending creditors' meetings . Please visit IVA.com.hk for details of their IVA legal service.

Step 1: Appointing a Nominee and Preparing a Statement of Affairs

The debtor must find a nominee who is prepared to act for him in relation to the IVA. Under the Bankruptcy Ordinance, the nominee means the Official Receiver or some person who by reason of his experience and qualifications is, in the opinion of the court, a suitable person to perform the duties relating to IVA. Mr. Lo Yip Tong and Miss Lau Wai Fung of our firm are both qualified to perform the duties as nominees. They have been appointed as nominee in a substantial number of IVA.

The debtor must submit a Statement of his Affairs which should be made up to a date not earlier than 2 weeks before the date of the written notice of the proposal to the nominee. If the debtor is an undischarged bankrupt and has already lodged a statement of affairs in the bankruptcy proceedings, he need not deliver a further statement of affairs unless required to do so by the nominee.

Step 2: Drafting a Proposal

The debtor has to prepare a proposal.

The proposal is a repayment plan showing how the debtor will pay or compromise with his creditors in relation to his debts. The proposal deals with the handling of the debtor's assets and liabilities; his or her income and expenditure. A debtor will almost invariably consult the intended nominee in drafting his proposal.

Step 3: Interim Order and Nominee's Report on Debtor's Proposal

The debtor applies to the court for an interim order which provides him with a 14-day period of moratorium. During the moratorium:

* no bankruptcy petition may be presented or proceeded with against the debtor and
* no other legal proceedings or actions may be taken against him or his property without the permission of the court.

If the debtor is an undischarged bankrupt, the interim order may contain provision as to the conduct of the bankruptcy, and the administration of the bankrupt's estate.

At least 3 days before the expiry of the interim order, the nominee will submit a report to the court stating whether in his opinion a meeting of the debtor's creditors should be summoned to consider the proposal and if such a meeting should be summoned, the date, time and place of the meeting.

If the court decides that a creditors' meeting should be summoned, the court can extend the interim order for a further period so that the proposal can be considered by the creditors.

Step 4: Creditors' Meeting

If the court orders a creditors' meeting to be held, the nomiee will call the meeting. The creditors' meeting is held to decide whether or not to approve the proposal in relation to the IVA.

The proposal can be subject to modifications agreed during the meeting. The debtor has to attend the creditors' meeting since modifications may involve substantive negotiations between the debtor and the creditors. The approval or modifications of a proposal at a creditors' meeting requires a majority in excess of 3/4 in value of the creditors present in person or by proxy and voting on the resolution.

Where a creditors' meeting approves the proposal, it will bind every creditor who in accordance with the rules had notice of and was entitled to vote at the meeting whether or not he was present or represented at it.

Step 5: Implementation and supervision of approved voluntary arrangement

The approved proposal for an IVA is deemed to be in force and effective from the date of the creditors' meeting. The nominee appointed at the creditors' meeting will implement the arrangement and pay the creditors in accordance with the accepted proposal.

Any bankruptcy petition, which has been stayed by the interim order, will be deemed dismissed on the interim order ceasing to have effect 28 days after the meeting approving the proposal has been reported to the court.

The court may annul the bankruptcy order made against a bankrupt with or without conditions if his proposal is approved by the creditors' meeting.