Decisions, Decisions, Decisions
Insolvency (England and Wales) Rules 2016, as amended, has introduced several methods for obtaining decisions (also known as resolutions) from creditors.
The creditor voting world as we know it changes on 6th April 2017.
From the point of view of an office holder, Physical Meetings of creditors are prohibited unless creditors exceeding one of the thresholds (either alone or with others) requests one, or the Insolvency Act 1986, as amended, [“IA86”] or Insolvency (England and Wales) Rules 2016, as amended, [“IR16”] specifically requests a physical meeting.
Basic Decisions Concepts
The convener of the meeting is always identified on the Notice convening the decision procedure. The convener of a decision process is going to be the office holder in the insolvency proceedings. However, in some pre-appointment corporate proceedings, the convener may be a director of the company.
Thresholds for a Physical Meeting Request
- 10% in value of the creditors or contributories
- 10% in number of the creditors or contributories
- 10 creditors or contributories.
If one of the above thresholds has been met via requests from creditors or contributories, then the convener of the decision process must stop the decision procedure selected, and convene a physical meeting of creditors.
Once a vote is cast in a decision procedure, a creditor may not change their mind about how they vote, unless it is a vote in one of the two types of meeting (i.e. Physical or Virtual).
For meetings, the Decision Date is the date of the meeting; in all other decision making processes it is the date the decision is made or deemed to have been made (this therefore encompasses potential adjournments).
For meetings the Decision Time is the time of the meeting; in all other decision making processes it is treated as being made at 23:59 hours on the Decision Date.
Qualifications to Vote
A creditor has to deliver a completed proof of debt in order to cast a vote in a decision procedure.
Even if the creditor balance is a small debt (i.e. less than £1,000) and has been assumed to rank for dividend purposes, in order to rank for voting purposes the small debt creditor still has to deliver a proof to the convener of the decision.
A contributory is assumed to have a voting capacity in line with their shareholding voting rights.
The Decision Procedures
The IR16 do not provide any guidance as to the utilisation or otherwise of this procedure for obtaining a decision of creditors or contributories.
In practical terms, a Notice of Decision by Correspondence will be issued containing a voting section to complete and return to the convener of the meeting on or before the Decision Date.
This decision procedure will be an “agree or disagree” choice. The Notice of a Decision by Electronic Voting will contain instructions in how to participate in the electronic vote. It is anticipated that there will be a Creditor Portal with a log in process.
No modifications are permitted to the decisions posed and no one is allowed to find out how anyone else voted until the Notice of Decision Outcome is published by the convener of the decision process.
This type of meeting must enable creditors to communicate with both the convener and with other participants in the meeting.
Proxy forms must be delivered with the Notice convening the meeting for a person wishing to participate in the voting without actually participating in the meeting.
It is envisaged that these will be via telephone conferences, webinars, etc. A virtual meeting can be suspended for up to one hour (or longer in exceptional circumstances) or adjourned for not more than 14 days.
There is a complaint process for a person excluded from a Virtual Meeting.
Unless the IA86 or IR16 specifically states that a Physical Meeting is to be held, these are prohibited unless requested by creditors or contributories meeting one of the thresholds stated above. Within 3 business days of a threshold being met, the convener must convene a Physical Meeting.
Proxy forms will be delivered with the Notice convening the meeting for a person wishing to participate in the voting without actually participating in the meeting.
Generally, a request for a Physical Meeting has to be made to the convener of the Decision within 5 business days of delivery of the Notice of the Decision.
Physical Meetings must have regard to the convenience of those invited to participate in them. A Physical Meeting can be suspended for up to one hour (or longer in exceptional circumstances) or adjourned for not more than 14 days.
There is a complaint process for a person excluded from a Physical Meeting.
Any Other Procedure that Allows Creditors to Participate
This is an attempt by IR16 to “future proof” themselves in case some new technology arises that will allow for such progression.
This is a process whereby a Notice of Deemed Consent will be issued by a convener that essentially states “the following decisions will be made unless 10% of those entitled to vote object to the decision”.
How to object will be stated within the Notice of Deemed Consent.
Deemed Consent decisions cannot be utilised for decisions regarding any aspect of remuneration for any person. In practical terms, this means the deemed consent procedure cannot be utilised for approving proposals for Voluntary Arrangements or an Administrator’s proposals if they contain information about the basis of remuneration.
Should 10% of voting participants object to the decisions then the convener of the Deemed Consent procedure has a choice (subject to any other requirements of IA86 or IR16) as to whether or not they
- Utilise a different decision procedure
- Do not bother with another decision procedure.
The “10% objection right” is a different right to the creditor right to request a Physical Meeting.
Invite to a Committee
With every Notice convening a decision procedure, the convener must deliver a Notice of Invitation to Form a Committee (being either a Liquidation Committee or a Creditor Committee, as the case may be).
As the IR16, apply retrospectively to all appointments commencing after April 2010, the governing rules of a Voluntary Arrangement are the proposal document, any standard terms and conditions adopted, any first meetings modifications adopted and any subsequent variations adopted.
It is custom and practice that the proposals (and other documents) refer to “meetings of creditors”. This is very case dependent and the wording of the proposals (and other documents) needs to be scrutinised on a case by case basis to see if the following applies.
Therefore variations convened after 06/04/2017 are highly likely to have to be a virtual meeting including a resolution to adopt the Part 15 decision procedures available.
It is hoped that voting parties will perceive the significant cost saving benefits to the adoption of all Part 15 decision procedures.
For further information please contact a member of our team below.