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Creditors’ Meetings to be Abolished -Amendments to the Insolvency Act

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The Insolvency Act 1986 is to be amended by the abolition of the requirement for creditors’ meetings to be held as the default means of decision making, replacing this instead with a “deemed consent” procedure or a “qualifying decision” procedure.

Sections 122-123 of the Small Business, Enterprise and Employment Act 2015 will introduce the new provisions to the Insolvency Act (Sections 246ZE – 246ZF (for corporate insolvencies) and Section 379ZB (for bankruptcies)).

It was anticipated that these new provisions would come into force in October 2016 (alongside the new Insolvency Rules) but a commencement date has not yet been given and provisions have also not yet been made regarding what will constitute the “qualifying decision” procedure.  It should be noted that the implementation of the new Insolvency Rules has since been deferred to April 2017. 

Deemed Consent

Once these new provisions of the Insolvency Act are in force, where a person seeks a decision about any matter from a company's creditors or contributories or a bankrupt’s creditors under the deemed consent procedure, notice of the following must be given to those creditors/contributories that are entitled to vote (unless they have opted not to receive such a notice):

The decision will be deemed to have been made unless more than:

object to the decision and make a written request that the decision be made by a creditors' meeting or (as the case may be) a contributories' meeting.  If the abovementioned number of creditors/contributories or less object to the proposed decision, the decision will be deemed to have been made.

Where a request is received for a creditors meeting to be held (whether or not a decision is sought only from a particular class of creditor) such a meeting must then be summoned and held.

The deemed consent procedure will not be available in relation to decisions regarding an officeholder’s remuneration (a qualifying decision procedure must be used for this) or where the Act, Rules or a Court Order do not allow for it to be used (for example, in relation to Section 98 meetings).

Finally, if the decision was deemed objected to, the deemed consent procedure may not be used for a second time (a qualifying decision procedure must then be used instead).

What Next?

The new sections of the Insolvency Act give powers for the above provisions to be easily amended and/or supplemented.  It remains to be seen when these provisions will come into force, what the qualifying decision procedure will be and whether any further amendments will be made to them in the meantime – watch this space!

 

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