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Part 15 Insolvency Rules 2016 consolidates the rules in relation to notices, voting rights, exclusions and appeals introducing some much needed consistency between the different insolvency processes. Most of the changes are minor, but the new Rules also introduce two radical changes:
1. The abolition of physical meetings as the default decision making mechanism in all insolvency processes, and
2. New decision making procedures (including deemed consent which will be covered in next week's update.)
Physical meetings which have been held since the late nineteenth century will now be the exception rather than the rule, with the most obvious casualty being the section 98 meeting to place a company into Creditors Voluntary Liquidation. Arguably, this is the most controversial reform introduced by the new Rules for which there was very little support during the consultation process. Supporters argue the new Rules reflect the reality of limited creditor engagement and will save both time and money whilst allowing technology to play its part in the decision making process. Critics argue the abolition of physical meetings will only deter creditor engagement still further as well as depriving creditors of the opportunity to question directors and debtors and compare notes with one another.
r.15.3 applies whenever a decision of creditors is required.
The decision making procedures are:
(b) Electronic voting, which "includes any electronic system which enables a person to vote without the need to attend at a particular location". Amongst other things, the notice to creditors must explain how to access the system and include details of any password. Unless electronic voting is being used at a meeting, the system must allow creditors to vote at any time until the decision date and must not provide details of votes cast by other creditors. The decision is treated as made at 23.59 on the decision date.
(c) Virtual meetings, which means "a meeting where persons who are not invited to be physically present together may participate in the meeting including communicating directly with all the other participants in the meeting and voting (either directly or via a proxy holder)". Amongst other things, the notice to creditors must explain how to access the virtual meeting and include details of any access code or password. The notice must also contain a statement that the meeting may be suspended or adjourned by the chair.
(d) Physical meetings as described in s.246ZE(9) SBEEA 2015 (corporate insolvency) and s.379ZA(9) (personal insolvency) but subject to the "rule of 10's" (see below).
(e) Any other decision making procedure which enables creditors to participate equally - in effect future proofing the decision making process.
Under r.15.2(2) the decision date is at the discretion of the convenor but must be no less than 14 days from the date of delivery of the notice of the decision making / deemed consent procedure.
The so called "rule of 10's"
However, under s.246ZE(9) and s.379ZA(9) physical meetings can only be requested within five business days of the notice of the decision making / deemed consent procedure and only if made by:
10% of creditors by number
10% of creditors by value, or
10 individual creditors
As with all rules there are exceptions including the winding up by the court of an authorised deposit taker where meetings are mandatory and notice must be given to the FCA unless the court orders otherwise.
Deemed consent will be covered next week.