Creditors Meeting
To get to the stage of a creditors meeting in an Individual Voluntary Arrangement - Personal Insolvency Liability either one, or a number, of the creditors present the debtor with a statutory demand for payment, for a figure of at least £750.
If the debtor fails to pay the amount demanded within 21 days, the creditor’s can petition the court ( * a creditor’s petition) for the debtors bankruptcy. If the court grants the petition the official receiver is appointed and can call a meeting.
*A debtor can petition for their own bankruptcy – a debtor’s petition.
In an individual bankruptcy the official receiver (a civil servant) has 12 weeks, from the making of the bankruptcy order, to decide whether or not to call a meeting of the bankrupt’s creditor’s.
If the official receiver believes that an insolvency practitioner (a paid, professional administrator) will not be appointed at any such meeting (and the costs of such appointment covered from the bankrupts assets) there will be no meeting. However, a creditor can at any time approach the official receiver with information, questions or claims of irregular trading etc.
In a Corporate (Company) Insolvency, as with an individual, a demand exceeding £750 is presented to the debtor usually by the creditor/s (*but can be by a shareholder, the DTI, the official receiver or the Bank of England) and 21 days are allowed for payment.
Winding up by the court will follow if the debtor is insolvent and cannot pay it’s debt’s, or the debtor company by special resolution agree to the winding up of the company, or the court believes the company and creditors are best served by winding up the company.
*The debtor company can petition for it’s own winding up.
Creditor’s meetings are possible in every type of corporate and individual insolvency. The purpose of the meeting is to:
- appoint an official to control the insolvency
- set out the time frames and cost of the insolvency
- realize the best return for the creditors with the assets of the insolvent party
- to investigate the cause of the insolvency and report to the creditors
- to report any irregularities to relevant government bodies
- to decide on the best course of future action
Before a meeting, all creditors must be sent a proxy form that has the debtors details and meeting time and date. In extreme circumstances, or where you (the creditor) found out too late about the insolvency to wait for a mailed proxy form, you should request that the insolvency practitioner email/fax you the necessary paperwork up to 24 hours before the meeting. This form will act as your voting preference. You can enter the name of your accountant to act on your behalf and vote on matters as they see fit. Or you can enter your own name if you are to attend the meeting.
Finally, you can state on the form that whoever is the chairman of the meeting, they also have your vote. Many small companies with smallish claims can get toge ther to out-vote the bigger creditors if you do not agree with the insolvency proposals. If you do not register your claim before the creditors meeting it does not mean that you cannot have your claim included in the insolvency, it does mean that you will not be able to vote at the meeting of creditors.
A proof of debt form will accompany the proxy. The proof required for a creditor to be included in the insolvency action being; a copy invoice, an order form, a lease agreement etc. An authorized company employee should complete and sign the proof of debt form and return it to the insolvency controller for inclusion on the statement of affairs. If you do not have an invoice for proof, bring as much documentation as you have to the meeting, or copy all documents and send to the insolvency controller.
At the meeting, creditors can ‘grill’ the debtor, and to some degree the insolvency controller as well. A creditors meeting is not about you having your say, it is about getting answers: so demand them!
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