Any creditor who had previously been involved in a creditors’ voluntary liquidation (CVL) would have been invited to attend an Section 98 creditors’ meeting to be informed of the company’s position and to vote on the next proposed step.
However, thanks to the Insolvency Rules 2016, which came into force on 6 April 2017, now all that has changed.
The new Insolvency Rules have introduced a range of other decision-making procedures that should be used in place of physical meetings in a creditors’ voluntary liquidation. This is due to the fact that it was often the case that the only parties to attend the creditors’ meeting were the company directors and the insolvency practitioner. By removing physical meetings, the costs of the liquidation process and the time it takes to complete should be reduced. However, despite the fact that physical meetings are no longer the default decision-making process in a CVL, creditors can still request that a physical meeting is convened.
The 10/10/10 Rule in Liquidation
In some instances, the company’s creditors may decide it is beneficial to have a physical meeting. It could be that they wish to appoint their own liquidator or even delay the process somewhat. In this case, the formal request for a physical meeting can only be made after a decision-making procedure has already been initiated and enough creditors request it.
For a physical meeting to be called, it must be explicitly requested by:
- 10 percent of creditors by value; or
- 10 percent of creditors in number; or
- 10 creditors.
This is known as the 10/10/10 rule. If any of these thresholds are reached, the decision-making procedure that had been initiated will be terminated and a physical meeting will be convened.
Convening the Creditors Meeting
Clearly, given the nature of the 10/10/10 rule, it is essential the insolvency practitioner keeps a close eye on the number of objections coming in. In order to be counted by the IP, the request for a physical meeting must be received no later than five business days after the delivery of the notice informing creditors of the decision-making procedure to be used.
The physical meeting must then be called within three days of the 10/10/10 threshold being passed. Any decision made in the physical meeting will supersede any previous decisions that have been made using another decision-making procedure.
Are you a creditor who’s struggling to understand the new rules? Perhaps you’re not sure what decision-making procedure is right for you? Whatever your circumstances, please call 08000 746 757 or email: [email protected] for the no-obligation assistance you need.