The introduction of the new Insolvency Rules on 6 April 2017 will bring significant protocol changes for creditors as well as for the Insolvency Profession.
Creditors have long been used to receiving notices for creditor meetings where the key decisions regarding the insolvent company or individual will be made. From 6 April 2017, physical creditor meetings will no longer be the norm and will only be summoned in cases where at least 10% of the creditors in value, or at least 10% of the creditors in number or at least 10 creditors formally request such a meeting. Further, this formal request can only be made after a ‘decision making’ procedure has already been initiated.
Creditors quite rightly remain the key decision makers, but will now need to become familiar with new terminology and methods of exercising this control.
The new rules define four decision procedures being a virtual meeting, correspondence, electronic voting and physical meetings. However, as described above, physical meetings will now only be summoned in exceptional circumstances.
Virtual meeting – a meeting where creditors are not invited to be at a physical location but may participate in the (virtual) meeting or communicate directly with the meeting convener and others present at the (virtual) meeting.
Correspondence – a scenario whereby creditors are circulated with a report containing relevant information together with proposed resolutions reflecting decisions required to be made. The report must also contain instructions for creditors on how to vote. Creditors are requested to return voting papers by a specified decision date. There is no obligation to vote, but any votes received after the specified date will not be included in the decision making process.
Electronic voting – a system whereby creditors may vote without having to attend a physical location to do so. This system may be used in conjunction with a virtual meeting (above) or for simply casting a vote by the specified decision date.
A further concept of ‘Deemed Consent’ is available where voting returns are not received. Creditors are deemed to have consented to a decision or resolution after notice of the decision or resolution has been sent to creditors and fewer than 10% in value have objected to it. If objections are not received by the specified decision date, creditors will be deemed to have consented. However, Deemed Consent may not be used for the approval of remuneration, or appointment in a creditors’ voluntary liquidation.
This summary is not comprehensive and is intended only to raise awareness of the implications to creditors of one aspect of impending changes to a variety of insolvency processes. More details are readily available on this website under our August 2016 news item. Should you require further information on any of the matters raised above, or if you require advice on any aspect of insolvency, please contact us.