You may not have heard the latest novel interpretation of the Rules that the Insolvency Service have provided. To say that quite a few knickers have got twisted following their announcement is an understatement.
The starting point for this fascinating journey is Rule 6.14(6)(a) which says that the request may be made at anytime between delivery of the notice and the day of the decision.
Up to now you may have thought, as did most of the compliance community, that this would include the day of the decision. This, of course, was fine for a deemed consent process, as the creditors’ appointment wouldn’t actually be taken to be confirmed until 23.59 on the day of the meeting.
But for virtual meetings, this could surely cause a problem – if a virtual meeting was held at 11.00, but the objection threshold was reached at (say) 19.00, then the CVL appointment, whatever it had been, would have to be treated as void, as would any other resolutions passed at the meeting.
Now, fair enough – you might say that few people could imagine creditors demanding a physical meeting instead of a virtual meeting and in any event, surely they would do so earlier in the process – right? But we IPs are few! And we might just imagine a circumstance in which a creditor proving for more than 10% of the claims might, if unhappy with the appointment at the virtual meeting held at 11.00am, put in an objection at 14.00 to force a rematch, giving time to canvass more votes for their nominee.
But now the insolvency service has decided that the word “between” should not include the day of the meeting. Perhaps uncharitably, we think the IS may have thought of this interpretation after the event, as a way of circumventing the above scenario. But, as one suitably irritated friend put it, their suggestion seems equivalent to being asked to pick a number between 1 and 10, but not be able to choose either 1 or 10.
So – what to do?
Well – there is a surprising range of options –
- Follow the earlier accepted interpretation of the Rules and allow objections after the meeting, up to 23.59 that evening, relying upon the members’ resolution to legitimize any appointment.
- Follow the new Insolvency Service advice and stop objections at 23.59 the day before the meeting.
- Follow a suggestion made by another of my compliance friends, to accept objections up to the start of the meeting (or perhaps the end of the meeting) but not after, on the grounds that it is a nonsense that a quorate and properly convened meeting can somehow be rendered void.
But the trouble is that, common sense or not, all our opinions must be subject to the judgement of the court and who knows what that might be. Which leads me to a tentative response of –
- Follow the insolvency service advice, having made sure that your notice states that any request must be received “between the delivery and decision dates (i.e. the xxth (the day before the meeting))”. But if the objection threshold is reached after that point, contact the objector(s) and say so, right away, so they can then complain to the Court if they want. With a defense that you were following the insolvency service’s advice, you should at least avoid any sanction for your decision.
In the alternative, of course, you could follow my earlier general recommendation for CVL appointments, of going for deemed consent in the first instance, thus avoiding this whole mess…