Director’s guide to the new insolvency rules
Virtual Creditors’ Meetings
The majority of initial creditors meetings (known to some as Section 98 meetings) in a liquidation will now be held by ‘virtual’ meeting rather than a physical meeting. For example, this can include, but is not limited to:
- A simple telephone call
- A telephone conference
- A chat room
- A video conference
It doesn’t need to be decided in advance and the Insolvency Practitioner who is advising you will likely decide the best medium once there is an idea of the number of creditors involved.
Often, it will just be a case of conducting a telephone call as the majority of creditors meetings won’t be attended. However, we do expect some increase in creditor engagement with these meetings because creditors are no longer expected to attend or travel to the meetings, and engaging with the process will therefore be that much more convenient for them.
Why the new rules?
The purpose of these changes are to cut down on excess financial and time costs. The insolvency practitioner will now be able to communicate electronically with creditors, which will be much quicker and less costly. (This is not to say that physical meetings can’t take place, just that it is much less likely: physical meetings can be requested by 10 per cent of the creditors in value, 10 per cent of the total number of creditors or 10 individual creditors.)
If creditors don’t engage with the insolvency practitioner’s communications regarding the liquidation, it will be presumed that they accept the IP’s proposals. Creditors can, of course raise an objection if they wish, but they can do this directly and electronically now. In keeping with the above, there will also now be no ‘final meeting’ to present the distribution of assets and release the IP from office at the end of the insolvency process. This too will be done electronically, to save costs and time.
Apart from that, the liquidation process will continue in the same way that it always has. If you’d like more information on the process, see our articles Creditors’ Meetings: what happens? and liquidation: the process for a detailed step by step run through of the process.
If you are thinking about liquidation, try our free liquidation calculator to see what the process might cost you. Alternatively, if you have specific questions, feel free to contact one of our business rescue experts directly for more tailored advice.