Variation Creditors' Meeting
For those people who have come across the phrase 'Variation Meeting', here is a brief explanation of what it is and how it is used by an Insolvency Practitioner to keep an IVA on track.
What Is A Variation Meeting?
A 'Variation Meeting' is the name given to a 'Creditors' Meeting' held mid-way through the term of an IVA, convened when an IVA client needs to propose a change to their original IVA proposal.
The Variation Meeting is usually chaired by the IVA Supervisor or a member of their staff.
As with the original IVA Creditors' Meeting, the meeting is usually a virtual affair, with no legal obligation on either the IVA candidate or their creditors to actually attend in person.
Creditors will be asked to vote on the amendments, or variation, being proposed. Again, there needs to be a 75% majority, in debt value terms, that accept the variation before it can be considered legally binding.
IP discretion under the IVA Protocol
Since the introduction of the IVA Protocol in February 2008, the need for Variation Meetings has reduced to some degree.
The IVA Protocol introduced new powers of discretion for Insolvency Practitioners, allowing them to make modest reductions in IVA contributions and to provide a fixed number of payment breaks without the need to gain creditor approval.
The limits of their discretion are detailed in the terms and conditions of all protocol compliant IVAs.
These changes were introduced, along with a raft of other measures, with the intention of streamlining the IVA process and, in turn, reducing IVA costs.
Why would a Variation Meeting be called?
A Variation Meeting would normally be called if the IVA client needed to propose a material change to their original agreement.
This could be for a variety reasons, but most will relate to a change in the client's circumstances, which is affecting their ability to maintain the IVA in its present form.
The meeting allows a variation to be tabled, outlining the changes needing to be made to the original proposal, necessary for the IVA to continue.
Common reasons for a variations include seeking a reduction to the IVA contributions, seeking a change to the term or duration of the IVA or seeking to propose an offer of early settlement.
Why would creditors accept a variation?
Creditors recognise that personal circumstances change and that making adjustments to accommodate that change will often enable an IVA to continue when it might otherwise need to be abandoned.
In the majority of cases, a variation to the original agreement still represents a better financial outcome for creditors than that which they could expect through the bankruptcy process.
A Variation Meeting tends not to be as stressful for clients as the original Creditors' Meeting, although there is a slightly longer creditor notice period of 21 days, though this period can be as much as 28 days, depending on the terms of the original IVA proposal.
How do I arrange a Variation Meeting?
If you think you need to request a variation, the best course of action is to approach your IVA Supervisor and explain your reasons behind the request.
If they agree that your change in circumstances warrents calling a Variation Meeting, they will get the process underway for you.