Debt Management Plans

2.1 It is proposed that:
2.1.1 The company pay into this voluntary arrangement, the sum of £3,500 per month for a Four year period.
2.1.2 Mr Orange introduce £115,000 into the business, which will be used to reduce the X Bank overdraft. Mr Orange would then be granted a second debenture.
It is further proposed that Mr Orange  would be treated as a “deferred creditor” and would not share in any part of the dividends paid to creditors out of the pool of money arising from the £3,500 per month payable into this arrangement.
2.1.3. The ‘associated’ creditors totalling £94,745 also be treated as deferred creditors.
Additionally, it is proposed that and Mr Pink capitalises his outstanding loan totalling £79,745 which sums are included in the total of £94,745.
2.1.4 In relation to X Bank PLC (The Bank) the following proposals are made:
that the company collect in the existing debtors totalling £64,000 and pay that in its entirety to the bank. (The bank are entitled to those monies in any event as they hold a fixed charge over trade debtors).
that the old bank account be frozen at its present balance of £198,000 and that the £64,000 expected to be received in from the existing debtors be paid in to that old account.
that the £115,000 to be paid in by Mr Orange be paid into that “old” bank account.
the consequences of the above transactions are that the directors expect the old bank account to reduce as follows:

that the bank consider providing the company with a “new” overdraft facility based on the cashflow projections and profit projections shown at schedules 8 and 9.
(The director, Mr Orange would continue to provide outside security to X Bank PLC for the residual balance on the “old” account and the balance on the new account).
that the company pay to the bank a monthly sum of £1,000 (being capital and interest) to extinguish the residual balance on the “old” account over a period.
2.1.5 The effect of these proposals in terms of the dividend payable to preferential and unsecured creditors is calculated at Schedule 6 attached.
From that schedule it should be noted that:
preferential creditors would be paid in full on the first anniversary of the arrangement.
unsecured creditors would receive dividends on the second, third and fourth anniversaries. It is proposed that each of these dividends be one third of the amount owed to creditors, such that all unsecured creditors will have been repaid in full by the time of the fourth anniversary.
2.2 To minimise Sponsor’s costs, it is additionally proposed that the Sponsor will not be involved with the subsequent trading of this company, if this proposal is agreed except to the extent set out in Clause 2.19.
2.3 Schedule 1 to this proposal lists all of the assets of the company showing estimated net realisable values, on a going concern basis, less amounts owing to secured preferential and unsecured creditors.
2.4 It is proposed to deal with the claims of creditors as follows:

SECURED CREDITORS

X Bank PLC is the only secured creditor. X Bank PLC have a fixed and floating charge over the assets of the company.
Nothing in this proposal however, restricts the rights of X Bank PLC at present or in the future of appointing either a book debt receiver or administrative receiver.
A “new” bank account has already been set up with Y Bank PLC for post D.M.P. trading. An overdraft on that new account will be requested by the directors based on; the attached cashflow forecasts (See schedule 9). The balance on the “new” account is presently a positive figure of £11,769.

PREFERENTIAL CREDITORS

It is proposed to deal with claims of preferential creditors as follows:
Preferential creditors arising from the pre D.M.P. period will enjoy the same priority, as if there had- been a  liquidation.
It is further proposed that a new additional class of preferential creditor would arise should there be any failure of this arrangement. Such creditors would be calculated within the meaning of Sections 175 and 386 of the Insolvency Act 1986 with the “relevant date” being the date on which the Sponsor issues a “Certificate of Failure of the Debt Management Arrangement”.
Pre D.M.P and post D.M.P preferential creditors are to enjoy the same priority one as against the other in relation to all of the unpledged assets.
DEFERRED CREDITORS

The following creditors are classed as “deferred”.

It is proposed that deferred creditors receive no dividend over the four year life of the arrangement.
It is proposed that £79,745 of the existing loans be capitalised.
Once all pre D.M.P. preferential and unsecured creditors have been paid in full, the two classes of creditors shown above will no longer be classified as deferred.

UNSECURED CREDITORS

Pre D.M.P. unsecured creditors will rank pari passu for payment. Any such claims which had been inadvertently omitted from the attached statement of affairs or the arrangement and whose total debts do not exceed 10% of the total of all claims lodged will be invited to claim in and be bound by the arrangement. This is subject however, to the proviso that any dividend already paid will not be disturbed, but lost dividends can be made up from any future distributions.
In the event of this D.M.P. failing, then post D.M.P. unsecured creditors will have a claim as ordinary unsecured creditors then ranking equally with pre D.M.P. unsecured creditors.

ASSOCIATED CREDITORS

Those creditors “associated” with or “connected” with the company within the meaning of Section 249 of the 1986 Insolvency Act are set out in detail at Schedule 5 attached.
All ‘associated’ creditors are proposed to be treated as ‘deferred’.
2.5 To the directors knowledge, there are no circumstances giving rise to the possibility, in the event that the company should go into liquidation, of claims under:-
Section 238 (transactions at an undervalue)
Section 239 (preferences except to the extent referred to at paragraph 4.3)
Section 244 (extortionate credit transactions)
Section 245 (invalid floating charges)
However, there are 66 creditors -each being for a sum less than £200, which together total £3,637. Those creditors have not been included in this document as it is proposed that the company immediately settle those creditors in full. The directors of the company are of the opinion that that would be the most cost effective way of dealing with such small creditors.
2.6 No liabilities of the company have been guaranteed by any other party except that the liability to X Bank PLC has been guaranteed by Mr Kingston and Mr Harrow.
2.7 It is proposed that the D.M.P. last four years.
2.8 Distributions to creditors and amounts thereof are proposed to be made as follows:

2.9 A reconciliation is shown at Schedule 6 detailing the total amount to be realised into the arrangement less the costs of the arrangement, to provide the net figures being the amount distributable shown above.
Any creditor who has not lodged his claim having received 21 days notice will be excluded from that dividend, but if the claim is lodged late, that creditor will be entitled to make up that amount from future realisations.
2.10 Sponsors fees for producing the D.M.P. proposal and for dealing with all matters up to and including negotiations with creditors is proposed to be in the sum of £5,000 plus V.A.T. or 10% Plus VAT of the unsecured creditors of the company whichever is the greater.

It is further proposed that the Sponsor recover all third party disbursements and also be entitled to any costs and disbursements including legal costs, which he incurs in connection with any legal action by creditors, unless the court orders otherwise.

2.11 It is proposed that Sponsors fees be based on the time costs of the Sponsors company.
It is also proposed that the Sponsors remuneration shall be calculated by reference to the time spent by the Sponsor and his staff.
The Sponsor’s fees and expenses shall rank ahead of the claims of creditors.
The Sponsor will be entitled to be reimbursed his costs any any other expenses incurred in bringing or defending any action in the arrangement, unless the court order otherwise.
2.12 The directors of the company do not propose to offer any additional personal guarantees to creditors in relation to this proposed D.M.P. proposal.
2.13 The Sponsor shall open a current account at Barclays Bank Plc ……………………..and all payments to the Sponsor shall be promptly paid into such account. The Sponsor shall have discretion to invest funds surplus to the immediate requirements of the arrangement on deposit on money market from time to time, pending any distribution of such funds.
2.14 If upon termination of the arrangement, any funds held for the purposes of payment to creditors remain in the hands of the Sponsor because any creditor (a) has failed to claim at all, or (b). has not cashed any cheque forwarded to him, or (c), can no longer be traced or, if after the D.M.P. has been concluded, the then former Sponsor receives funds which were not anticipated to have been receivable at the time of closure, such funds will be dealt with as follows:
If the aggregate of such funds after costs exceeds £1,000, a further distribution shall be made to those creditors who are able to participate therein, less the (former) Sponsor’s outstanding time costs and disbursements, if any. If such funds, however, amount to less than that amount, the costs of a distribution are not justified and accordingly, the balance will be returned to the company after deducting any amounts outstanding for any outstanding time costs and disbursement of the (former) Sponsor.
2.15 During the course of the D.M.P., the new trading of the company will not be carried out under the auspices of the Sponsor and the Sponsor will not be involved in or in any way responsible for such new trading.
2.16 During the continuation of this D.M.P. any new credit taken by the company during the course of the arrangement is to be settled by the company ex. the proposed new Y Bank Plc D.M.P. account. That new bank account being operated by the directors of the company and not by the Sponsor. In the event of the failure of this arrangement, any positive balance on that account will be treated as being available to meet the costs of the arrangement and of the Sponsor and secondly to be available by way of set off against the “old” X Bank account.
2.17 The Sponsor’s functions shall be:
(a) To receive all funds payable into the arrangement (i.e. £3,500 monthly)
(b) To negotiate all creditors claims.
(c) To make distributions to creditors in due order of priority and on the due dates shown at paragraph 2.1.
(d) To retain solicitors, agents or other professional advisors if required for the beneficial purposes of the arrangement at the expense of the estate.
(e) To receive monthly profit and loss accounts and balance sheets. To forward all creditors annually a summary of the company results and as to the general progress of the arrangement.
(f) To authorise the release of funds form the estate to defend disputed claims where appropriate.
(g) To review on a regular basis whether the D.M.P. has failed in accordance with the criteria set out in paragraph 2.19 below.
2.18 It is proposed that the Sponsor of the arrangement shall be BDG Solutions in relation to the company.
2.19 These clauses deal with the control of the D.M.P. and the Sponsor’s duty should the arrangement be declared a failure.
2.19.1 The arrangement shall be declared a failure if:
(a) The first instalment of £3,500 is not received within seven days of the arrangement being approved at the creditors meeting called to consider this proposal.
(b) Two consecutive payments of the monthly instalments are not received on the due dates. The due date of each instalment, except the first, being on the 31st of each month.
(c) Monthly payments of interest are not paid to: –
X Bank PLC
d) Monthly profit and loss accounts and balance Sheets with supporting, schedules of all key figures are not provided to the Sponsor within 30 days after the end of each monthly accounting period.
2.19.2 If any of the four instances referred to in paragraph 2.19.1 above arise the Sponsor will immediately:
– circularise all creditors and issue a “Certificate of Failure” of the arrangement.
– apply to the Court for the company to be compulsory wound up should the directors not sign notices to call a creditors meeting under Section 98 of the 1986 Insolvency Act within seven days of the issue of the Certificate of Failure.