An IVA would allow Mr Montague to avoid the stigma of bankruptcy and to remain as a director of CTRG. Bankrupts are banned from acting as directors of a company.
To go ahead, the IVA would need the agreement of 75 per cent by value of Mr Montague's creditors, who are owed pounds 30m. It would consist of a phased payout to his banks under the supervision of an insolvency practitioner.
A clear split has opened up between Mr Montague's personal bankers. Royal Bank of Scotland wants to have him declared bankrupt while Commerzbank, which accounts for more than half his personal debts, is more favourable to an IVA.
Barclays Bank, which has a mortgage over Mr Montague's pounds 8m Oxfordshire mansion, has not decided which scheme it will support.
Royal Bank filed a bankruptcy petition against Mr Montague two weeks ago for debts of pounds 2.3m. A successful application for an IVA would prevent the bank from making him bankrupt.
The bank is pressing on with its bankruptcy petition, due to heard on 28 October at Oxford County Court. The bank acknowledges that it will have to accept the IVA if the vote goes the other way.
CTRG's position is that Mr Montague's personal financial affairs are not the company's concern. Yesterday a spokesman did not rule out an IVA application by Mr Montague, saying: 'His relationships with his banks are for him to make. The company would review facts, not speculation. We'll deal with facts when presented with them.'
A number of CTRG's institutional shareholders have voiced concern recently over Mr Montague's continued leadership of the company.
A spokesman for one of the rebel institutions said of a possible IVA application: 'We would have to consider the facts and get more information before coming to a view. It does raise some questions.'
Mr Montague told shareholders at CTRG's annual meeting on 15 September that he had no personal financial problems and was not aware of any bankruptcy petition.
At the same meeting CTRG's incoming chairman, Ian Clubb, said that Mr Montague's presence at the helm was vital to restoring the company's fortunes.
''It is my strong view that without Robert Montague . . . it will not be possible for me to achieve my goals for the shareholders,' Mr Clubb said.
The next day, following the revelation that Royal Bank had filed its petition, CTRG issued a statement saying: 'Ian Clubb has confirmed that his appointment as chairman and his ongoing commitment to the company are not affected by Mr Montague's personal financial position.'
An application to the court for an IVA, with assistance from an insolvency practitioner, would prevent any other legal action against the debtor. The court may stay all other legal procedures, including bankruptcy.
The IVA was introduced in the 1986 Insolvency Act to provide a less formal procedure than bankruptcy, and the scheme now accounts for one in eight of personal insolvencies. Its advantages are its flexibility, its lack of publicity and the lower costs involved.Reuse content