Is your client a creditor of a bankruptcy? Here’s how to remove or change trustees now…
If your client is a creditor of a bankrupt estate, they currently they have the right to request to change the trustee.
However, new legislation (The Insolvency Law Reform Act or ‘ILRA’) that came into effect in September 2017 and this will change the process of doing so.
How to remove or change a bankrupt trustee – before the new regulations
Previously, to remove or change a bankrupt trustee, a meeting of creditors or resolution without a meeting was requested. This is convened for the purpose of voting on a resolution to change the trustee.
Your client can also apply to the court to replace a trustee, if convinced it is proper to do so. Usually, the court only grants this if the trustee is not independent or has done something wrong and a new trustee needs to take over the estate.
The above rules were still in play until the Insolvency Law Reform Act (ILRA) took effect on 1 September 2017.
The Insolvency Law Reform Act (ILRA)
Schedule 2 90-35 of the ILRA (Bankruptcy) replaces the current law regarding the removal of a trustee by resolution of creditors at a meeting.
The key points of the new legislation are as follows:
The trustee of a bankrupt estate may convene a creditor meeting at any time and MUST convene them in particular circumstances, such as:
- Where there is a committee of inspection and the committee of inspection directs the trustee to do so; or
- The creditors direct the trustee to do so by resolution; or
- At least 25% in value of the creditors direct the trustee to do so in writing; or
- Both of the following are satisfied:
- Less than 25%, but more than 10%, in value of the creditors direct the trustee to do so in writing; and
- Security for the cost of holding the meeting is given to the trustee before the meeting is convened.
Creditors can, by resolution at a meeting, remove the trustee; but they may NOT do so unless at least five business days’ notice of the meeting is given to all persons who are entitled to receive notice of it.
The new rules also provide that a former trustee, who has been removed as trustee of the bankrupt estate by resolution of the creditors, may apply to the Court to be reappointed as trustee of the bankrupt estate.
If the Court sees fit to do so, it may then consider orders on the costs of the application and the remuneration of the former trustee to be covered.
Need help to remove or change a bankrupt trustee?
The new process to replace a trustee is extremely technical and can be confusing. In particular, under the ILRA, there have been quite a few changes to:
- Calculations in the value of creditors for voting purposes; and
- Rules for calling for a creditors’ meeting
As highly trained professionals, we have the in-depth knowledge and expertise to assist your clients in making important decisions regarding trustees. We can assist with:
- Assessing client circumstances and advising whether it is possible to call for a creditors’ meeting and vote by resolution to replace the trustee;
- Assisting your clients with completing proof of debt form, proxy form, and providing general advice in relation to creditors’ meetings;
- Acting on behalf of clients to communicate with the trustee;
- Providing general and technical advice on queries related to the bankrupt estate and debts owed.
Please note that, if circumstances allow, Rapsey Griffiths can even provide consent to act as the replacement trustee, as we have the resources to act as trustees of companies in various situations.
Contact us here for further information: 1300 727 739.