How Does a Creditor Make a Complaint as an Excluded Person?
A raft of changes to the insolvency rules was introduced in April in an attempt to make communication during liquidation procedures faster and more effective, amongst other objectives. The formerly default creditors’ meeting in a Creditors’ Voluntary Liquidation (CVL) is now replaced with a number of decision-making procedures, such as correspondence or email, electronic voting or a virtual meeting using a conferencing call or video conferencing.
‘Deemed consent’ has also been introduced with the new rules. Creditors are now 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.
Creditors can also exercise their right to request a physical meeting if they can meet the 10/10/10 rule. This is 10% of creditors (in value) or 10 individual creditors or 10% of creditors (in number) must support the request for this type of meeting.
Conference calls and video conferencing are convenient and free of charge, depending on the provider. However, the main risk of holding a virtual meeting is that a participant who has all the details necessary to access the meeting, but through no fault of their own, can’t get online at the specified time or drops out of the meeting unexpectedly due to a slow and unreliable broadband connection. In this case, the frustrated creditor who has missed the meeting in its entirety or just attended part of it becomes an ‘excluded person’ in insolvency terms.
When Someone is Excluded
When the chair of the meeting, typically a company director becomes aware of an ‘excluded person, there are a handful of options available. For instance, he or she can chose to continue the meeting, declare it void, declare it valid up to the point where the person was excluded, suspend it temporarily (up to an hour) or adjourn it.
If the chair decides to continue the meeting then it is considered valid, which means the resolutions passed by the creditors are also valid. When this happens, the excluded person may want to know what occurred during the meeting whilst they were ‘excluded’. He or she may feel it necessary to make a complaint to the liquidator about the decision to continue the meeting without them.
Making a Complaint
If the creditor wants to make a complaint, he or she has a fairly small window of opportunity that is no later than 4 pm the next working day if no “indication” has been requested by the excluded party. An indication is a request for information about what took place during the meeting. If an indication has been requested, the excluded party has to lodge a complaint before 4 pm on the business day following receipt of the indication.
As a result of the complaint, the liquidator may conclude that the excluded person’s vote could change the result of the close-run meeting, overturning resolutions thought passed. Therefore, in this scenario the chair has two options: firstly, to reconvene the meeting or secondly, to count the vote of the excluded person, amend the record of the results and give notice to everyone involved in the meeting. In either case, the liquidator must deliver notice of any decision reached in response to the complaint as soon as possible. There is currently no stipulated time limit.
The new insolvency rules have introduced a number of qualifying decision-making procedures for creditors, if you would like to know more about the CVL process and how to exercise your rights as a creditor, please call 08000 746 757 or email firstname.lastname@example.org for free and confidential advice from one of our professional advisers.