What Happens at the Creditors’ Meeting (Section 98) During a CVL?
Once a company has decided upon a Creditors Voluntary Liquidation, a creditors meeting will be called so that creditors can learn more about their situation, and vote towards the best course of action for the company. The key to the Meeting of Creditors is that the creditors will be asked to vote on the appointment of the liquidator.
A summary of the company history and events leading up to the liquidation will also be provided along with at least one acting director to answer questions.
NB: As per revised insolvency legislation, the Section 98 meeting has now been replaced by a new process – see this article on Virtual Meetings in Insolvency for more details)
Key Information Provided
- Creditors are presented with a director’s sworn Statement of Affairs, along with a verbal explanation of the contents.
- If anyone present has a prior relationship with the proposed liquidator, they will explain as much to everyone present at the meeting.
- Those present will receive confirmation that the shareholders meeting has occurred, along with its date and location. If any resolutions were passed, that information would be shared with the creditors
- Creditors will be informed when, precisely, the company directors signed notices to call the meeting.
- If the preparation of the Statement of Affairs or the creditors meeting itself (i.e. room rental) has incurred any costs, then those figures will be declared.
- A brief report will be given to the company’s trading history and the reasons for the current insolvency. This moment is the chance for creditors to put their questions to directors as to what exactly has happened.
- The previous three year’s accounts will be provided for the creditors, together with a deficiency account, as further illustration of the reason for the forthcoming liquidation.
- Nomination of the liquidator – All the creditors who have lodged a proof of claim are entitled to vote towards the nomination of a liquidator. More than 50% of the votes cast must be in favour of the liquidator that is appointed.
Who is Allowed to Attend the Section 98 Meeting
- Any company creditor who can lodge a proof of claim can attend the meeting within the Creditors’ Voluntary Liquidation process, as well as company directors and company secretary.
- The proposed company liquidator will also be present.
- Journalists have no legal right to attendance, but they may be admitted unless the chairman wishes otherwise. Similarly, any other interested party (i.e., landlord, or employee) may request attendance from the chairman.
- If both the directors and the creditors are proposing their liquidators the representatives of several firms may be present.
- For creditors who are unable to attend, but who wish to make their vote known, a proxy representative of their company will attend in their place.
- At least one acting director must attend to chair the meeting and address any questions. Practically, however, it is the proposed liquidator who will likely manage the meeting itself.
Does the Meeting of Creditors need to be held at a Specific Place or time?
The Statement of Insolvency Practice (SIP 8) is very clear on the timings necessary for creditors meetings. Once the shareholders have instigated a resolution for voluntary winding up, the company must stop trading. After that, the first meeting of creditors must take place within fourteen days, so that that owed money by the company have a chance to meet, further understand their situation, and appoint an insolvency practitioner to liquidate the company.
Where are the Meetings held?
Section 98 of the Insolvency Act 1986 contains a section titled ‘Summoning and holding meetings of creditors’ which explains this. The appointed liquidator should choose a convenient place for all concerned, which may be the offices of the Insolvency firm, provided no one objects. If the Insolvency firm’s office is chosen, they are entitled to make a reasonable charge accordingly.
What Happens if I can’t Attend?
As the creditor of a company that is going into creditors’ voluntary liquidation, you will receive notice of a meeting, usually by post, in which the forthcoming insolvency will be under discussion. At that meeting, each creditor is entitled to vote on matters about the liquidation, so it will obviously serve your interests to attend and offer your opinion. If you are unable to attend in person, but still wish to vote, you’re entitled to lodge a proxy with the liquidators. The method of doing that is to lodge proxy form, which you can send by post, or fax to the meeting chairman.
How to fill out Your Proxy Form
Your proxy form will need to contain your name, company, or other body owed money by the limited company which is undergoing a CVL. You will need your full address, including postcode. The most important part the proxy form involves your appointment of a proxy holder, which is commonly a solicitor, for example. More than one proxy holder can be put forward, in case the first choices unable to attend. A third option is to appoint the Chairman as your proxy holder, in which case you’ll need to state this clearly by filling in ‘chairman of the meeting’ in the space for the proxy holder’s name.
Voting Instructions for Specific Resolutions
If you have appointed a proxy holder, you will not need to give any voting instructions assuming you’re happy for that individual to exercise his or her discretion. Failing that, you will need to signify your instructions with regards to particular resolutions. One of the likely resolutions for the first creditors meeting is the appointment of an insolvency practitioner or liquidator, so you will need to list your choice’s name if you wish to vote for them.
Signing the Proxy Form
The signature on your proxy form should be that of a company director or another duly authorised representative of the creditor.