Modifications to proposals under the new Rules

Unless you do VA’s reasonably frequently, you may not have paid too much attention to the “exchanges” there have been between us compliance nerds and the Insolvency Service, on the decision process in VA’s.  But there is a genuine issue here and to cut a long story short, it really leaves only one practical way to get a VA proposal approved.

To explain – under Rule 15.31(8) a creditor’s vote, once cast, cannot be changed.  There is a certain innocent logic to this rule, but it does mean that if you try to get a proposal agreed by anything other than a virtual meeting (i.e. correspondence or electronic vote) then either the creditor must vote for or against the proposals as made.  There is no possibility of proposing modifications and because the vote is treated as cast when made (e.g. when the vote is received by post or correspondence) it’s already too late to negotiate.

So, what to do?

The easy way –  seek the decision by virtual meeting. Creditors proxies can include space to propose modifications and the process of voting can be done much as in the past. The only thing I would suggest is that your notice or, perhaps the proxy itself, ask for proposed modifications to be put in writing before the meeting takes place.  Of course, as discussed in my blog on S.100 appointments, there are technical issues to overcome with any virtual meeting process, so there may be firms for which virtual meetings remain a problem

The other way – If you aren’t confident about the above process, or you think you have a good chance of getting approval without modification then you can seek the decision by correspondence.  But if you do, watch out –

  1. Any proposed modification may well have to be dealt with as a vote against, as there is no provision in the Rules for postponing a decision or altering the terms of the proposed decision once the notice has been issued.
  2. Although Rule 2.25 (or 8.22) gives you scope to specify how modifications can be put forward and how you might deal with them, it doesn’t allow you to revise the proposals without starting the process afresh.
  3. Although you might arguably be able to use the required statement under Rule 2.25(5)(b) (or 8.22(3)(d)) to treat a request for modification as a request for a physical meeting, you would only be able to act on that, if you got to the threshold number or value, within five days of the notice being delivered.
  4. So, even if you had modifications that the creditors could agree, you would likely have to issue a fresh set of proposals under a whole new process in order to get a valid vote in favour.
  5. While I have thought of at least two rather devious and artful work-arounds, both are so complicated as to render the whole process rather pointless, at least in my view (though you are welcome to email me for the ideas, to see if you can work out something better).

Of course, if TIXX or HMRC or any of the others would issue a blanket request for all VA proposals to be dealt with by physical meeting, then we could all get back to a rational and safe method of dealing with VA’s. But in the absence of such a miracle, I am afraid we will have to stick to virtual meetings.

And finally – what about electronic voting? Really, really cumbersome, unless you already have the requisite majority in the bag, or your voting platform allows modifications to be put in with the votes (so far, I haven’t heard of one that does).