Creditor Rights in Liquidation & Administration

Supporting Creditors Rights in Liquidation

Site_Logo300pxWeb

Supporting Creditors Rights in Liquidation

Voting Rights

Find below the information you need about
Creditor Voting Rights in Voluntary Administrations

Need information about Voting Rights for Creditors in Liquidations?

 

Creditor Voting Rights in Voluntary Administrations

Right to Request Information

In voluntary administration, two meetings of creditors are automatically held. The first meeting is held within 8 days of the Voluntary Administrator’s appointment. Information and a notice of the meeting will be issued to all known creditors.

At the second meeting, the creditors will get to plan the company’s future. A voluntary administrator will provide creditors with a notice and a report to assist in making your decision. This meeting is usually held within 6 weeks of appointment.

A creditor is entitled to information from the Voluntary Administrator at any time provided their request is:

  • ‘reasonable’,
  • the information is relevant, and
  • the provision of the information would not cause the Voluntary Administrator to breach their duties.

The information must be provided within 5 business days of the request receipt (unless agreed otherwise). The voluntary administrator may notify the creditor to extend the period if the nature of the information requires extra time.

*Reasonable Requests

A request is not reasonable if:

  • Complying with the request would prejudice the interests of one or more creditors, or a third party.
  • The information requested would be privileged from production in legal proceedings
  • Disclosure would find an action for the breach of confidence
  • There is not sufficient available property to comply
  • The information has already been provided
  • The information is required to be provided under law within 20 business days of the request
  • The request is vexatious.

*Note: If a request is not reasonable due to (b), (d), (g) or (h), the liquidator must comply with the request if the creditor meets the cost of complying with the request.

*Unreasonable Requests

A request is not reasonable if:

  • Complying with the request would prejudice the interests of one or more creditors, or a third party.
  • The information requested would be privileged from production in legal proceedings
  • Disclosure would find an action for the breach of confidence
  • There is not sufficient available property to comply
  • The information has already been provided
  • The information is required to be provided under law within 20 business days of the request
  • The request is vexatious.

*Note: If a request is not reasonable due to (b), (d), (g) or (h), the liquidator must comply with the request if the creditor meets the cost of complying with the request.

Right to Give Directions to Voluntary Administrator

  • A creditor may give a voluntary administrator directions in relation to a voluntary administration. Although a voluntary administrator must have regard for these directions but is not required to follow them.
  • If they do not comply with the direction, the voluntary administrator must document their reasons.
  • An individual creditor cannot provide a direction to a voluntary administrator.

Right to Appoint a Reviewing Liquidator

Creditors may appoint a reviewing liquidator to review the following:

  • Remuneration approved within the six months prior to the appointment of the reviewing liquidator, and
  • Expenses incurred in the 12 months prior to the appointment of the reviewing liquidator.

The cost of the reviewing liquidator is paid from the assets of the liquidation, in priority to creditor claims. However, if an individual creditor decides to appoint a reviewing liquidator with the voluntary administrator’s consent, the cost must be met personally by the creditor making the appointment.

Right to Replace Voluntary Administrator

The First Meeting:

  • Creditors have the right to remove a voluntary administrator and appoint another registered voluntary administrator in the first meeting.
  • To seek removal and replacement, a creditor must ensure that they have consent from another registered liquidator prior to the first meeting.

The Second Meeting:

  • A creditor can replace the voluntary administrator at the second meeting if:
  • Creditors vote to accept a proposed deed of company arrangement.
  • If creditors vote to place the company into liquidation

It is usual or the voluntary administrator to act as a deed administrator or liquidator. It would be expected that additional costs would be incurred by an alternate deed administrator or liquidator to gain the level of knowledge of the voluntary administrator.

To seek removal and replacement, a creditor must ensure that they have consent from another registered liquidator prior to the second meeting.

SOURCE: 200801 Creditor Rights Information (Voluntary Administration)