Quorum requirements in cases where there is only one creditor

In July 2022, the Bankruptcy Act 1966 was updated to provide further information on quorum requirements.

Section 75-105 states that:

A quorum consists of:

a) the trustee present in person; and

b) one person entitled to vote present in person; and

c) if the number of persons entitled to vote is 2 or more—one or more other persons entitled to vote present in person or by proxy or attorney.

We have received concerns that the new provision changes the quorum requirements in cases where there is only one creditor in the estate. AFSA’s view is that the phrase “[a] person entitled to vote” includes a proxy/attorney of a creditor, satisfying the quorum requirements. In the Inspector-General’s view, the words “or by proxy or attorney” in s75-105(1)(c) do not indicate a different requirement depending on whether there is only one, or more than one, creditor in an estate. This is reinforced by s75-85(1) which provides that “(A) person other than a creditor (or the creditor’s proxy or attorney) is not entitled to vote at a meeting of creditors”.

As a regulator, AFSA’s view is that where there is only one creditor in the estate, a quorum will exist if the trustee (or their representative if one has been appointed) is present and the creditor is also present in person or by proxy or attorney (provided the creditor’s proxy or attorney is not the trustee or their representative).

Example 1: Where only the trustee is present – no quorum exists regardless of how many creditors there are in the estate and regardless of whether the trustee hold proxies from, or has been appointed attorney by, any of those creditors.

Example 2: Where there is only one creditor in the estate – a quorum exists if the trustee is present and the creditor is also present in person or by proxy or attorney (provided the creditor’s proxy/attorney is not the trustee).

Example 3: Where there are two or more creditors in the estate – a quorum exists if the trustee is present and at least two creditors are also present in person or by proxy or attorney (provided those creditors’ proxies/attorneys are not the trustee). 

Note: References in the examples to ‘the trustee’ includes a representative of the trustee appointed under section 75-25 of Schedule 2 to the Bankruptcy Act.

For more information about the updates, visit our website.