Creditors don’t always fully appreciate their rights enabling them to influence the appointment of an independent liquidator at a creditors’ meeting to carry out investigations into the prior dealings of a creditor being placed into an insolvency process.
As creditor voting is based upon value then, of course, the bigger the value of your debt the greater the influence you will have in determining the outcome of the creditors’ meeting. The Recruitment Sector can often be major creditors as businesses in financial difficulty often turn to Employment Agencies as a short term source of credit to cover staffing costs. On the basis, however, that there will always be creditors who do not vote and that many resolutions only require a simple majority, even relatively minor creditors can influence the outcome.
When a company is being wound up by the Court, the Official Receiver (OR) will consider whether an independent liquidator should be appointed and creditors are wise to speak to the OR immediately following the Winding-up Order to establish his intention and seek the appointment of their chosen insolvency practitioner.
Similarly, where creditors’ meetings are convened by the directors to consider resolutions for a voluntary liquidation, or proposals for an arrangement (CVA), creditors should attend the meeting or otherwise use their proxy to influence the decisions made and to possibly seek the appointment of an independent liquidator/supervisor, if considered appropriate.
A creditor can also influence the outcome from investigations by providing information to the liquidator on matters relating to the conduct of the directors and management. Again those in the Recruitment Sector are often one of the last new credit suppliers to an insolvent business and your evidence may assist the liquidator to make recoveries from directors for wrongful trading, fraudulent trading or in respect of certain transactions that can be set aside by the Court. The temporary staff that you supply to the business may also have inside information that will assist the liquidator.
Creditors should use their vote at meetings and can enrol the assistance of their legal advisers to ensure the right questions are asked and enquiries made into issues of concern. All may not be lost, and the prospect of a dividend return improved, if the information provided improves recoveries
For further information and advice contact Steve Smith FCA FABRP, Licensed Insolvency Practitioner of Mercer & Hole Chartered Accountants St Albans via email stevesmith@mercerhole.co.uk or telephone 01727 869141 or visit www.mercerhole.co.uk.
