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CVL Creditors' Meetings

Common Questions and Answers (References to "Sections" and "Rules" are to the Insolvency Act 1986 and Insolvency Rules 1986 respectively)

Creditors Voluntary Liquidation (CVL)

Statement of Insolvency Practice 8 covers the obligations on the insolvency practitioner convening a creditors' meeting under S98 and provides some guidance that readers might find helpful. Please follow this link.

Where and when should the meeting be held?

The meeting should be called at a venue for the convenience of creditors at a time between 10.00am and 4.00pm. Seven clear days notice should be given to creditors (Section 98) although in practice it would be normal to provide two to three weeks unless there is a commercial urgency.

What will happen at the meeting?

Typically, the meeting will receive a report about the history of the company including a statement of affairs sworn by the directors detailing the assets and liabilities. This information will also be posted to creditors after the meeting irrespective of whether they attend. Various resolutions will be considered, in particular those deciding the choice of liquidator and, possibly the basis of his remuneration as well as the composition of any liquidation committee.

Who will be present at the meeting?

A director of the company will chair the meeting and the other directors have been asked to attend. They are available to answer creditors' questions. In practice, whilst he is not a chairman, one of the proposed liquidators will conduct the meeting on the chairman's behalf and read the directors' report.

Am I obliged to attend the creditors' meeting?

You are not obliged to attend the creditors' meeting. On the one hand, it is your opportunity to ask questions of the directors and decide how to vote for your choice of liquidator. On the other hand, you will not compromise your claim and entitlement to dividend in any way if you do not attend. The law recognises that creditors are not always able to attend in person and allows you to ask a representative to attend as proxy and vote on your behalf.

How do I ensure that my vote counts at the meeting?

In order to vote, a creditor must have lodged at the address stated in the notice of the meeting a written claim and the chairman must have admitted that claim following the guidelines below. (Rule 4.67). You might also need to have lodged a proxy form.

Do I need to lodge a proxy form?

If you are an individual creditor (i.e. not a limited company), you may vote by simply attending the meeting, as long as you have lodged a claim as explained above.

If you do not want to attend the meeting, you may nominate someone else, or the chairman of the meeting, to vote for you. They can vote either on your instruction or at their discretion. Do however remember that the chairman is a director and you might wish to consider specifying clearly on the proxy form how he should vote. (Rule 8.1).

You must do this by completing the enclosed proxy form or a substantially similar form. The form needs to be signed by the creditor or some person authorised by him, either generally or with reference to a particular meeting, and the nature of the person's authority should be stated (Rule 8.2). If a company is the creditor, a director should normally sign. The proxy form must then be lodged at our offices before 12.00am on the working day before the meeting (Rule 4.67)

Please also remember that if the debt is to a limited company and you wish to attend and vote at the meeting, you should complete and return the proxy form even if you are a director of the company. Alternatively you can produce at the meeting a sealed or appropriately certified resolution of the board authorising you to represent that company. (Rule 8.7)

What if I am late in submitting my claim and/or proxy form?

The chairman has the authority to allow late claims and/or proxy forms where he is satisfied the failure is due to circumstances beyond the creditors' control. (Rule 4.68). However do not rely on his discretion, ensure that you have met the deadline.

Who decides whether my claim ranks for voting purposes?

The chairman has the power to accept or reject any part of your claim if he believes it to be appropriate (Rule 4.70 (1)). If he doubts whether your claim should be admitted, he should mark it as objected to and allow it to vote. If however the objection is sustained, then your vote will be declared invalid. (Rule 4.70 (3)).

If your vote was critical to the outcome of the meeting, this could change the resolutions that were passed and/or result in a further meeting (Rule 4.70(4))

What happens if I disagree with the chairman's decision?

You are entitled to appeal to the Court for an order directing the chairman to accept your claim for voting. (Rule 4.70(2)). Alternatively, you could petition the court for a compulsory winding up of the company. We recommend that you seek legal advice about the merits of doing this in any particular circumstances.

How do I calculate my claim for voting purposes?

Your vote is based on the value of your debt at the date of the meeting of creditors. Votes rank in proportion to claim values. A resolution is passed at the meeting when a majority in value of those present and voting, in person or by proxy, have voted in favour of the resolution. (Rule 4.63)

What happens if I cannot yet quantify my claim with certainty?

A creditor shall not vote in respect of a debt for an unliquidated amount or any debt whose value is not ascertained except where the chairman agrees to put on the debt an estimated minimum value for the purpose of entitlement to vote and admits the claim for voting. (Rule 4.67(3))

What happens if my debt is partly secured?

You are entitled to vote only in respect of the balance of your claim (if any) after deducting the value of your security as estimated by you (Rule 4.67(4)). This security might include any rights arising under a distraint. If you have retained title to any items sold to the company, you should deduct from your claim the value of the items you still own. The position with hire purchase agreements is complex and separate advice should be sought.

How do I complete a proxy form?

How are the liquidators' fees approved at the creditors' meeting?

Please follow this link to a copy of the Statement of Insolvency Practice no 9 (revised December 2002) for a clear explanation of this question.

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This document explains the relevant position only in general terms. We do not intend it to be used as formal advice about a specific situation, for which you should consult with a qualified insolvency practitioner and not rely upon this document. Portland would be pleased to advise you formally and you should contact one of the directors listed to arrange this. Portland regrets it is unable to accept any responsibility to anybody who seeks to rely on this document.