Changes to insolvency law: the end of the round table

One of the major changes to insolvency law, particularly regarding the first meeting of creditors to place companies into liquidation, will be that physical meetings will no longer be an option, unless specifically requested by the required level of creditors.

Whilst this may seem like a new advancement, the previous Insolvency Rules have allowed for virtual meetings since 2010 and the team at Robson Scott Associates have been conducting meetings in this fashion and saving customers petrol and train tickets since 2011!

 

In our experience these meetings are far more efficient but because the uptake within the profession has been so low, law makers have decided to enforce this. 

 

There’s also been some changes to the decision making and consent procedures which we described in more detail next.

 

 

Deemed Consent

 

The first change is that under “deemed consent” process notices can be sent to creditors outlining the proposals involved with a deadline by which any objection to these proposals can be lodged. 

 

If less than 10% of creditors have objected to the proposal by this deadline then is it deemed to have passed. If the required amount of creditors do lodge an objection then the alternative decision making procedure should commence to consider whether a simple majority of creditors would accept the proposal. 

 

This isn’t formally classed as a Decision Making Procedure so officeholder remuneration cannot be approved through this procedure along with some other resolutions.

Decisions by Correspondence

 

This isn’t a new option and has been available since the rules changed in 2010. 

 

This route simply gives creditors a date to reply to the Insolvency Practitioner indicating whether they wish to approve or reject the decisions being proposed. 

 

Unfortunately, we’ve found that creditor engagement is poor relating to this option and often results in duplicated work as creditors don’t tend to respond and a formal meeting needs to be convened, increasing the costs of the case.

Electronic Voting

 

This is the first change to formal decision making procedures. 

 

It requires secure login details to be sent to creditors allowing them to visit a website and cast their vote on each of the proposals at any time from first receipt of the notice to the final deadline of the procedure. 

 

Creditors must also be limited on seeing the current voting progress until after the decision making deadline has expired. 

 

Access details are to be given on the notice documentation so Insolvency Practitioners will likely consider to add additional layers of authentication along with the proof of debt which must also be submitted in order to validate each of the votes received. 

 

Virtual Meetings

 

The next decision making procedure being hailed as a revolutionary new concept to a lot of firms is nothing new for us – we’ve been holding virtual meetings with clients and creditors for over six years.

 

Again, because of a lack of uptake amongst some Insolvency Practices, from April 2017 stipulates that a virtual meeting will be the default option.  It can be conducted in a number of ways including via conference calls, chat rooms or video conferencing. 

 

We’ve found that creditor participation is greatly improved in these meetings and allows for greater access for them without the time and expense of making travel arrangements. 

Physical Meetings

 

The old-fashioned, physical creditors meeting can now only be used when 10% of creditors by value, 10% by number and ten or more creditors request that one is held. This will be the biggest statutory change for the majority of Insolvency Practices. 

 

Physical meetings were often considered costly and with creditors based all around the UK or even abroad, it would be hard to determine a central locality to please everybody based on these circumstances. 

 

One reason why we made the early switch to virtual meetings was because we had encountered situations where although a meeting was being held in a relevant location, creditors from outside the area still had difficulty arranging attendance. 

 

S98 and Final Meetings

 

The final changes related to S98 and Final Meetings.

 

Given the nature of S98 Meetings, they will now only be dealt with under the Deemed Consent procedure or as a virtual meeting (unless a physical meeting is requested by sufficient creditors). 

 

They’ll now also take place with three business days notice as it’s deemed that creditors need less time to arrange attendance at a virtual meeting. Additionally, the member’s nominated liquidator is no longer required to attend these meetings.  

 

Final Meetings, which were almost never attended, have now been abolished entirely. 

 

Creditors now must file an objection to the office holder receiving their release by a specific deadline otherwise the release will be deemed as granted.