15 September 2017: It is nearly 6 months since the Insolvency Rules 2016 (“the Rules”) came into force. If you, or one of your clients, have received notice of a debtor entering formal insolvency, you may not know whether, or how, you can influence the outcome.
It can be daunting to receive notices of deemed consent or qualifying decision procedures – all new concepts in the insolvency industry. Should you participate? Can you influence the outcome? The Rules are intended to increase creditor engagement, therefore the answers must be “yes”.
An office holder can now be appointed by deemed consent, therefore, unless 10% in value of creditors object, creditors are deemed to have consented to the appointment.
Decision procedures (i.e. decisions by correspondence, virtual or electronic voting) will be convened where deemed consent has been objected to. Decision procedures replace physical meetings and can only be convened if requested by 10% in value of creditors, 10% in number of creditors, or 10 creditors. You don’t need to be the largest creditor to influence an outcome.
The powers to appoint and remove of an office holder remain with creditors, as well as the power to approve their fees. Unless fees are to be fixed, office holders must provide creditors with a fee estimate and any increase also requires creditor approval.
Creditors have the right to participate in a creditors’ committee, which serves to assist office holders in the performance of their duties.
Insolvency office holders continue to owe their principal duty to the creditors. If you or your clients find you are a creditor in formal insolvency proceedings, the experienced management team at BRI would be happy to discuss what this means for you and how you can effectively participate in the process to ensure that those financial interests are adequately safeguarded.