ACCA v Hollis: duties of officeholders in proposing CVAs
In Mourant & Co Trustees Ltd v Sixty UK Ltd  EWHC 1890(Ch);  1 BCLC 383 Henderson J found that a corporate voluntary arrangement (“CVA”) seeking to “strip” the landlord’s guarantees, given by the company’s parent, was unfairly prejudicial to the applicant creditor and should be set aside. Having examined the circumstances he was extremely critical of the role of the joint administrators who had proposed the CVA and who became its joint supervisors. Although not represented at the hearing before him (other than to seek an adjournment), Henderson J reached the view that the administrators appeared to have abdicated their responsibilities as office-holders and put forward a proposal for a CVA which they must have known could not be objectively justified and which was based on a cynical calculation by Sixty SpA (the parent) of what it hoped it could get away with. In addition he found that the administrators had misrepresented the true position to creditors. He referred the matter to relevant the regulatory body which was, in the case of Mr Hollis, the “lead” administrator, the ACCA.
The ACCA commenced disciplinary proceedings against Mr Hollis which (subject to any appeal) have recently been concluded and in which, in effect, the majority of Henderson J’s criticisms were found to be substantiated. Among other matters, Mr Hollis was found to have acted dishonestly in the manner in which he dealt with the relevant landlords in the lead up to the CVA; to have failed to follow and take expert valuation advice; to have put forward a CVA which was unfit and which was unfair to the landlords, his professional judgment having been unduly influenced by the interests of the parent company; and to have put forward a CVA which was not fit and feasible in that it was inadequately funded, alternatively it did not deal adequately with one of the creditors by compromising its claims.
He has been excluded from membership of the ACCA and as a result his licence as insolvency practitioner has been revoked.
The case illustrates the need for insolvency practitioners to maintain their independence and objectivity and to take care when making proposals for a CVA and in negotiating about the same with creditors. If they fail to do so, not only may the CVA be set aside but they may find themselves the subject of disciplinary proceedings with potentially serious consequences.
The ACCA were represented by Malcolm Davis-White QC and Lyndsey de Mestre in the disciplinary proceedings.
At the time of publishing, the decision may be subject to appeal.
[For further details see ACCA’s website]