Creditors meetings in liquidations provide the liquidator with a mechanism to communicate with the creditors of the company in relation to the progress of the liquidation, to seek creditor approval or guidance via creditor resolution on numerous matters, or in some cases are required by law.
In creditors voluntary liquidation a meeting of creditors is required to be convened within 11 days of the appointment of a liquidator being made by the Company’s members. A liquidator may call additional meetings during the liquidation period to provide creditors with an update as to the progress of the liquidation, to seek creditor approval of the liquidator’s remuneration or for any other reason the liquidator reasonably requires (such as to seek creditor guidance or approval of certain matters).
In a court liquidation, the liquidator is not required to call a creditors’ meeting unless a matter requires creditor approval or creditors pass a resolution requiring a creditors’ meeting to be called, or at least one-tenth in value of all the creditors request the liquidator in writing to do so. The chairperson of a creditors’ meeting (usually the liquidator or one of their senior staff) must prepare minutes of the meeting and a record of those who were present at the meeting and lodge them with the Australian Securities and Investments Commission (ASIC) within one month of the date of the meeting.
Quorum at a creditors meeting
A quorum at a meeting of creditors is constituted by at least two creditors who are entitled to vote and attendance can be either in person or via proxy. A creditors meeting cannot be validly held without a quorum.
If a quorum is not present at a creditors meeting within 30 minutes after the time set for the meeting, the meeting is automatically adjourned to the same day in the next week at the same time and place or to a day appointed by the chairperson (subject to notice requirements).
Voting at a creditors’ meeting
To be entitled to vote at creditors’ meeting, a creditor must lodge details of their debt or claim with the liquidator. Creditors will be provided with a Proof of Debt Form to be completed and returned before the meeting. Creditors may appoint a proxy to attend and vote at a meeting on their behalf. The proxy may vote generally or as specifically instructed by the creditor.
Voting on resolution at a creditors meeting will be initially taken on the voices (creditor’s voice in favour or against). However, a creditor holding more that 10% in value of all votes may request a poll to be taken. A poll is a written ballot of voting. A resolution will be passed if a majority of number and value vote in favour of the resolution.
If there is a deadlock in the voting, the chairperson is entitled to exercise a casting vote. In exercising the casting vote, the chairperson must detail the reason why he or she voted in a particular way.
Committee of inspection
In both types of liquidation, the liquidator may ask creditors if they wish to appoint a committee of inspection and, if so, who will represent the creditors on the committee. A committee of inspection assists the liquidator, approves fees and, in limited circumstances, approves the use of some of the liquidator’s powers, on behalf of all the creditors. Committee meetings can be arranged at short notice, which allows the liquidator to quickly obtain the committee’s views on urgent matters. Shareholders may also be members of the committee. A committee of inspection acts by a majority in number of its members present at a meeting, but it can only act if a majority of its members attend.
A liquidator must consider any directions given by the committee of inspection, but is not bound to follow them. Minutes of committee of inspection meetings must be prepared and lodged with ASIC within one month of the date of the meeting.
For more information on corporate insolvency or specific insolvency services, contact the team at Rapsey Griffiths on (02) 4929 3019 for a confidential consultation.