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when is a debt not a debt? – how your claim is treated in an insolvency for voting purposes

3 February 2011

It is frustrating enough when a company owing you money becomes insolvent, still more so when the amount for which you can vote is restricted when deciding whether or not a company’s proposals should be approved.

The treatment of a claim was recently considered in proceedings brought by HMRC against the administrators of Mercury Tax Group Ltd where the court gave some helpful guidance on how to deal with unliquidated and unascertained claims for voting purposes. Ascertained claims (usually debts) must be allowed in whole for voting purposes and marked objected too, even if they are disputed. These claims can be contrasted with unascertained claims where the insolvency practitioner estimates a minimum value for voting purposes. This judgment emphasises the point that creditors are better off arguing that their claim is ascertained (even if it is disputed in full) as their vote could make all the difference in whether proposals are approved.

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