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Recovery Q and A 1

30 January 2015
I am a proposed liquidator of a company entering into CVL. My appointment depends on the vote of one particular creditor. That creditor has returned its proof of debt and a proxy form but these were not received until after the midday deadline stipulated in the notice convening the section 98 meeting. What should I do?

Generally, proofs and proxies which are not lodged within the prescribed time limits cannot be admitted for voting at a meeting of creditors.

However, where a creditors vote is considered significant, the chairman has a discretion to adjourn a creditors meeting to another date (rule 4.65 of the Insolvency Rules 1986). This will allow creditors who have not returned their proofs and proxies on time a further period of up to 14 days within which to do so. Any proofs and proxies already lodged for the original meeting can be retained for use at the adjourned meeting.

Alternatively, the chairman of a creditors meeting has a discretion to accept a late proof if he thinks fit (Painter v Hutchinson [2007] EWHC 758 (Ch)) or to allow a creditor to vote without lodging a proof if he is satisfied that this failure was due to circumstances beyond its control. Even if a creditors claim can be accepted in this way that creditor would still need to attend the creditors meeting in person or arrange for another party to attend in its stead in order to effectively cast its vote.

If a proxy has already been submitted (albeit out of time) a creditor would first need to withdraw that proxy in order to attend the meeting and cast its vote. In Re Cardona [1997] BCC 697 it was held that a creditor who is entitled to appoint a proxy is also entitled to revoke that proxy at any time prior to the relevant creditors meeting.

If the creditor in question is a company it may, by resolution of its directors, authorise a person to act as its representative at any such meeting. That person would then be able to exercise the same powers on behalf of the company as if it were an individual creditor. In this scenario, a separate proxy is not required however a certified copy of the relevant resolution should be produced to the chairman of the meeting.

Whilst changes were proposed to simplify these rules, disappointingly, those measures have not been incorporated in the eagerly awaited draft Insolvency Rules 2015. Until further steps are taken to modernise these procedures, the old rules will continue to govern and dictate the steps necessary for a creditor to be entitled to vote.

This article was first published in Recovery Magazine

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