Creditors' meetings
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.