Major changes to the insolvency regime were introduced in April 2017 by the government for the following reasons: “The rules have been recast to reflect modern business practice and to make the insolvency process more efficient.”
To save time and money, the formerly default physical or face-to-face meeting has been replaced with more up-to-date decision processes, such as correspondence or email, electronic voting and virtual meetings such as conference calls and video conferencing. Regardless of the new processes, creditors remain key decision makers during the liquidation process.
Although physical meetings have now been superseded, the company’s creditors still have the right to request one if they can meet the 10/10/10 rule.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 meeting for it to go ahead.
Deemed consent has also been introduced alongside the other qualifying decision-making procedures. 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 specified decision date, creditors are ‘deemed to have consented’ to the decision or resolution. However, this system cannot be used for the approval of the liquidation fees, and another meeting process must be used here instead.
In line with insolvency rules, notice that the deemed consent procedure is being used must be advertised in The Gazette. This is a daily newspaper and website produced by the government that publishes a wide range of notices for public record. The notice details the proposed liquidator, the decision date as well as how creditors can object to the proposals.
Timings for Deemed Consent
The day after the shareholders’ meeting where the resolutions have been passed, the directors have seven days to issue a notice to creditors. The notice must specify the matter concerned, the proposed decision to be made, which decision-making procedure will be used, such as deemed consent, and information on how to object, amongst other details.
The ‘decision date’ is the deadline for any objections to the proposals. This date by the chair or ‘convener’ and should not take place any later than 14 days after the notice is delivered. If objections have not been received at this time, creditors are deemed to have consented.
Objecting to Deemed Consent
Creditors who want to object to using the deemed consent process must deliver a notice in writing to the liquidator by the decision date together with a proof of debt for the objection to be accepted. If the objection threshold is met (10% of creditors by value), a physical meeting must be convened to make the decisions. This must happen no earlier than three days after the notice seeking deemed consent was delivered and no later than 14 days after the objections threshold is met.
A raft of changes to the insolvency regime was introduced in April, despite these changes creditors remain key decision-makers in the insolvency process.
If you would like to know more about your rights as a creditor, please call 08000 746 757 or email [email protected] for free and confidential advice from one of our professional advisers.