In a Virtual Meeting, When Does a Creditor Need to Submit a Proof of Debt?
Before the introduction of the new insolvency rules in April, the default meeting process for a creditor of an insolvent company was a face-to-face otherwise known as a creditors’ meeting. However, due to the national and sometimes global nature of business, it was frequently difficult to pinpoint a location for the meeting that was convenient for everyone. As well as being time-consuming, physical meetings were costly, which was at odds with the liquidator’s core function of maximising returns for creditors in the form of dividends.
The day after the shareholders’ meeting, where resolutions are taken to wind up the company and nominate a liquidator, directors must deliver a notice to creditors within seven days, requesting that they cast their votes on the proposals. Creditors who want to participate must first submit details of their claim against the company, also known as a ‘proof of debt’, to the liquidator. The creditor is notified by correspondence if the proof is accepted in part or in full.
The ‘qualifying’ or official decision-making procedures are correspondence, electronic voting, virtual meetings, such as video conferencing or deemed consent. Correspondence or email involves completing and returning the voting form to the liquidator. Electronic voting uses a platform, such as Survey Monkey to enable creditors to cast a secure vote on each proposal. A virtual meeting encompasses an array of possibilities, such as conference calls or video conferencing platforms, such as Google Hangouts or Skype. Creditors are sent a phone number, access code or password to access the meeting in the notice.
Deemed consent can also be used as a qualifying decision-making process. This is where creditors are ‘deemed to have consented’ to a decision or resolution if 10% of creditors (by value) have not objected to it. Physical meetings can also take place if creditors can meet the 10/10/10 rule. That is, 10% of creditors (in value) or 10 individual creditors or 10% of creditors (in number) must support the request for this meeting to take place.
What Does a Proof of Debt Look Like?
Creditors must provide the liquidator with a proof of the debt. As there is no longer a standard form, creditors must submit their claim to the liquidator with the following information: name and address, total amount of claim, including VAT, whether there is uncapitalised interest (any interest due up to the date of the liquidation), how the debt was incurred, details of any security, details of any retention of title. Supporting documents should also be submitted at this time.
The liquidator must verify, assess and date the proof of the debt. He or she can either accept the whole or part of the debt or rejects it. Creditors who are owed less than £1,000 do not need to submit a proof of the debt, providing the insolvent company has a record of the debt. The proof of debt must be lodged before 4 pm one business day before the meeting or decision date. If the deadline is missed, it is left to the discretion of the chair whether to accept it. Proxies can be lodged at any time up to the time of the virtual meeting.
If you would like to know more about the decision-making procedures involved in a CVL or what your rights are as a creditor of an insolvent company, please call 08000 746 757 or email email@example.com for free and confidential advice from one of our professional advisers.