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Why are meetings of creditors held?
Meetings of creditors are called for various reasons, the most common being:
- consider an offer of composition or scheme of arrangement in full settlement of debts (special resolution required)
- for the trustee to inform creditors about the conduct of the administration
- to change trustees.
Debt agreements and personal insolvency agreements
Meetings can be held in relation to debt agreement administrations to establish, vary or terminate agreements. Voting can occur by creditors posting (or otherwise delivering) voting letters to the Official Trustee rather than by a formal meeting of creditors.
Controlling trusteeship meetings are conducted in order to manage the transition from a section 188 authority to a personal insolvency agreement.
Voting can occur by creditors posting (or otherwise delivering) voting letters to the trustee rather than by a formal meeting of creditors.
Where a bankrupt wishes to make a proposal to creditors for a composition in satisfaction of their debts or a scheme of arrangement of their affairs, they can provide a proposal to their trustee for consideration.
The trustee will review the proposal and prepare a report, notify the Official Receiver and call a meeting of creditors to consider the proposal. The creditors may, by special resolution, accept the proposal.
Notice of a meeting of creditors in a bankruptcy
Creditors receive notice if there is to be a meeting of creditors. The notice may include a report to creditors about the administration or the proposal to be considered at the meeting and must be given at least 10 business days before the meeting.
The meeting may be at a physical location, by phone conference facility, a web-based video conferencing facility (a virtual meeting) or a combination of these.
Along with the notice and trustee's report (if any), creditors will receive a form for stating their claim or debt (which will be styled as a 'Statement of claim' or proof of debt) and a form for appointing a proxy (if they wish to be represented at the meeting). The notice will include an agenda setting out the matters to be considered at the meeting.
Notice of the first meeting of creditors to consider a bankrupt’s proposal for a composition/scheme of arrangement under section 73 of the Bankruptcy Act, or to consider a debtor's proposal for a personal insolvency agreement under Part X of the Bankruptcy Act, must be lodged with us. Details of the notice are published on our website.
Who is allowed to vote?
Only a creditor (or a person validly appointed as their proxy or attorney) is entitled to vote at the meeting.
A creditor must give to the trustee at or before the meeting a completed statement of their claim or debt setting out:
- the amount owed by the bankrupt
- brief particulars of the transaction and the circumstances that gave rise to the debt
- if security is held, the estimated value of the security and the value of any shortfall. The creditor can vote only to the value of the shortfall.
Note that a creditor is not entitled to vote where no statement setting out their claim or debt is provided to the trustee at or prior to the meeting.
If a creditor wishes to appoint a proxy, the completed proxy form must be provided to the trustee at or prior to the meeting, as it will assist the trustee in determining whether a quorum exists and who has the voting rights.
Proxies are tabled at the beginning of the meeting. If a proxy is accepted after the initial announcement, the proxy holder may vote on subsequent resolutions.
Proxy holders have obligations to disclose whether they have received any financial incentive to vote in a particular way.
The debtor cannot be appointed as a proxy.
If a creditor wishes to be represented by an attorney, the creditor must arrange for the power of attorney to be produced to the trustee at or before the meeting.
A quorum consists of the trustee (or his/her authorised representative) as well as:
- if the number of persons entitled to vote is more than 2–at least 2 of those persons present in person or by proxy or attorney
- if the number of persons entitled to vote is 2 or fewer–that person or those persons present in person or by proxy or attorney.
A meeting is sufficiently constituted if the trustee is present, but only one person entitled to vote is present in person at the meeting, provided that person represents personally or by proxy or attorney a number of persons sufficient to constitute a quorum.
There can be no quorum without the presence of the trustee (or his/her representative). Nor can the trustee (or his/her representative) alone constitute a quorum, even if the trustee holds proxies from one or more creditors.
Resolutions may only be proposed by the trustee or creditors (including their validly appointed proxies or attorneys). A reasonable time will be allowed for discussion then a vote will be taken. If resolutions are proposed at the meeting with no prior notice, creditors may wish to adjourn the meeting to take time to consider these matters.