What is the 10/10/10 Rule in a CVL?
In the past, the default creditors’ meeting was face to face and had to take place within 14 days of the shareholders meeting, where a number of resolutions are passed, such as to wind up the business, nominate a liquidator and fix the liquidator’s fees. Creditors were then given seven days’ notice of the meeting, where they were informed of the company’s financial position and were able to cast their vote on the resolutions.
Now, as a result of the new rules, liquidation timescales and the decision-making procedures have changed in favour of a more streamlined and flexible approach. Creditors are kept in the loop during the insolvency process. However, this is no longer done through physical meetings unless a creditor specifically requests one and has the support of other creditors. This is called the 10/10/10 rule. This means 10% of creditors (in value) or 10 individual creditors or 10% of creditors (in number) must support the request for this type of meeting.
The day after the shareholders’ meeting, the directors have seven days to deliver the notice of a meeting to creditors, requesting their votes on the resolutions. The meeting should take place no earlier than three days after the notice is delivered and no later than 14 days after the shareholders’ meeting. Creditors can cast their vote on the proposals, using one of the qualifying’ or official decision-making methods in line with the new insolvency rules. These are as follows:
- Correspondence – Completing and returning the voting form via email.
- Electronic voting – Completing the voting form using an electronic system, such as Survey Monkey.
- A virtual meeting – Video conferencing, for instance, can take place via Google Hangouts.
- A physical meeting – Formerly the norm, a face-to-face meeting can only be called by creditors in circumstances where they meet the 10/10/10 rule.
What is Deemed Consent?
In addition to the qualifying decision-making procedures, creditors are ‘deemed to have consented’ to a decision or resolution if 10% of creditors (by value) have not objected to it. In other words, if objections are not received by the decision date, creditors are ‘deemed to have consented’ to the decision or resolution. Liquidation fees are the exception to the rule as they cannot be decided by deemed consent and another meeting process must be used in this matter.
If you would like to know more about the new insolvency rules and the effect these have had on the CVL procedure, please call 08000 746 757 or email [email protected] for free and confidential advice from one of our professional advisers.