Creditors meetings for insolvency proceedings will no longer be needed unless requested by least 10% of creditors following a new government ruling as part of its small business reforms.
The Insolvency Service argued that attendance of creditors’ meetings is poor and there are more effective means of engagement in the 21st Century.
When trying to rescue a business in difficulty, Insolvency Practitioners have a number of options and one of the most helpful is the CVA (Creditors’ Voluntary Agreement) by which debts can be negotiated by a company to repay its creditors over a longer period and sometimes repaying a reduced amount.
Proposals must be drawn up and submitted to all creditors in advance for negotiation and approval. Approval requires a majority of 75% of votes cast.
Since any insolvency proceeding has to comply with a series of steps laid down by law, and IPs are paid for their services, the costs can quickly mount when creditors’ meetings are added to the mix.
Subject to approval the cost of holding creditors’ meetings can be saved and reduce the burden on both the company as well as improving the distribution to creditors.