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Creditors' meetings

Directors are often nervous and concerned about the format and purpose of creditors meetings and what their involvement will be.  This section aims to provide an overview of what happens at such a meeting.
 
Directors may be asked to attend creditors meetings by the Insolvency Practitioner either formally or informally.  Attendance may be obligatory so if for some reason you are unable to attend this should be discussed straight away.

Administration

Process

There is usually only one actual meeting held in Administration proceedings. 

This is the initial creditors meeting where the purpose is to approve the Administrators’ proposals.  This usually ratifies the actions undertaken so far and creditors agree how the remaining aspects will be dealt with in terms of completing the Administration, etc.  The Administrators’ proposals will also cover aspects such as the fees or remuneration of the Administrators.

At this meeting a creditors committee may be formed to assist the Administrator in the process and make certain decisions.

If the Administrator is proposing a Company Voluntary Arrangement then there will normally be a CVA meeting shortly following the initial meeting.

Director’s involvement

The chairman at this meeting will either be the Administrator or a member of their staff and they will effectively run the meeting.

The purpose of the initial meeting isn’t to give the directors a grilling over the reasons for the insolvency.  However the practitioner may allow creditors a period to ask questions relating to the Administration.  Directors should prepare themselves to be the recipient of some of these.

Questions that are asked in such meetings are usually aimed at determining whether the directors acted improperly.  Therefore questions usually relate to the point at which insolvency was known and about orders placed and deliveries received etc. around that time.  There may also be questions about the Statement of Affairs [LINK]

Directors should take care over what they say in any formal meetings as a full record will be maintained.  If in doubt refuse to comment to avoid compromising your position. 

Administrative Receivership

The purpose of the initial meeting in a Receivership is to present a report on the conduct of the receivership so far.

A creditors committee may also be formed at this meeting.  The committee have limited power or involvement.

Director’s involvement

The chairman at this meeting will either be the Administrative Receiver or a member of their staff and they will effectively run the meeting.

The purpose of the initial meeting isn’t to give the directors a grilling over the reasons for the insolvency.  However the practitioner may allow creditors a period to ask questions relating to the ap[pointment.  Directors should prepare themselves to be the recipient of some of these.

Questions that are asked in such meetings are usually aimed at determining whether the directors acted improperly.  Therefore questions usually relate to the point at which insolvency was known and about orders placed and deliveries received etc. around that time.  There may also be questions about the Statement of Affairs [LINK]

Directors should take care over what they say in any formal meetings as a full record will be maintained.  If in doubt refuse to comment to avoid compromising your position.

Company Voluntary Arrangements

The purpose of this meeting would be to present the proposal and answer any questions before moving on to whether creditors wish to approve it.

The meeting will normally be run by the ‘Nominee’ Insolvency Practitioner but the directors will be required to answer questions.

Questions normally relate to assumptions used in the forecasts and any unusual terms or history contained in the proposal.  There may also be queries about the Estimated Outcome Statement and any assumptions used.  Often these questions can be answered by the IP but anything commercial or requiring industry knowledge will have to be answered by the directors.

Creditors’ Voluntary Liquidation

The purpose of this meeting is to appoint or ratify the appointment of a liquidator.  The meeting is run by a director of the company who acts as Chairman.  It is normal for the Insolvency Practitioner present to act on the director’s behalf in respect of the format and running of the meeting.

At the meeting a report of the directors will be presented to the creditors present.  The creditors will have opportunity to ask questions. 

Director’s involvement

Unlike most other insolvency processes this is an opportunity to give the directors a grilling and they will be expected to answer questions.  However if unsure of an answer it is better to decline to answer then give a response that will have repercussions.  Questions will relate to activities up to the date of liquidation, why orders were placed, cheques sent out (if they bounced), who was paid and why, whether the director intends to start up again, details of related businesses, whether the directors have lost out financially, etc.

There may also be questions about the Statement of Affairs and the deficiency account.





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