The use of virtual meetings as a decision-making procedure in insolvency cases is a change that has recently been introduced by the Insolvency Rules 2016.
Bringing the Insolvency Rules in line with the rise in electronic communication will help to reduce the cost of liquidation, which can only be a good thing for all involved. It will also reduce the reliance on physical creditors’ meetings, which are often only attended by the insolvency practitioner and the company directors.
But the use of virtual meetings will also raise some questions and may even be rejected by the company creditors as the decision-making procedure of choice. Instead, they may request that a physical meeting of the creditors is convened.
How to call a Virtual Meeting of Creditors?
Virtual meetings are called in a similar way to physical meetings. The insolvency practitioner must give notice of their intention to call a virtual meeting along with details of the proposed decision, the date of the meeting, the platform to be used and any passwords or access codes the creditors will need to access the platform.
A virtual meeting of creditors must also be advertised in the London Gazette, as a physical meeting would be, and involve proxy forms, which can be delivered anytime up to the start of the meeting. Proofs of debt will also need to be delivered to the insolvency practitioner by 4pm the day before the meeting.
Security of process will undoubtedly be one of the biggest concerns for insolvency practitioners when calling a virtual meeting. For example, how can they be sure that any online broadcast of a virtual meeting is kept confidential and secure? Equally, finding a suitable platform on which to hold the virtual meeting could present a challenge.
IPs need to be able to identify attendees, particularly when they join and leave, and block access to those who are not entitled to attend the virtual meeting. There’s also the risk of having an ‘excluded person’ i.e. someone who was entitled to attend but could not due to connectivity or technological constraints. These are all issues insolvency practitioners and creditors need to consider carefully.
Objecting to a Creditors Meeting
Although cumbersome and risky, virtual meetings are the only effective way, short of calling a physical meeting, to negotiate a decision directly. However, it may be that the creditors would prefer the decision is made in another way.
As with the deemed consent process, on receiving the notice of a virtual meeting, a creditor can react by rejecting the virtual meeting and requesting a physical meeting. They have five days after the delivery of the notice of the decision-making procedure to deliver their request. A physical meeting must then be called by the insolvency practitioner if the ‘10/10/10’ thresholds apply. That is, if…
- 10 percent of creditors by value
- 10 percent of creditors by number
- 10 creditors
…explicitly request for a physical meeting to be called. The IP then has three days to convene a physical meeting of the creditors.
Need Advice about your situtation?
Not sure how the new Insolvency Rules affect you? Perhaps you’re a company creditor wanting to know whether a Creditors’ Voluntary Liquidation is right for your business? Whatever your circumstances, please call 08000 746 757 or email: [email protected] for the no-obligation assistance you need.