Module 4.2 Decision making

Question 1

What are the basic principles of decision making?

Answer 1

Post-April 2017– decisions must be made by a prescribed decision procedure

Physical meetings can notl be held unless requested by:
 10% in value; or
 10% in number; or
 10 creditors

The 10/10/10 Rule
 The references to creditors are to creditors of any class, even where a decision is sought only from creditors of a particular class
 All creditors receive the same notice, even if they are unable to vote (e.g. secured creditors)

Question 2

What are the qualifying decision procedures? (QDP)

Answer 2

a) Correspondence (no separate Rule for this method)
b) Electronic Voting (see R.15.4)
c) Virtual Meeting (see R.15.5)
d) Physical meeting (see R.15.6) [Restricted by the 10:10:10 rule]
e) any other decision making procedure which enables all creditors who are entitled to participate in the making of the decision to participate equally

Question 3

When can’t deemed consent be used?

Answer 3

Deemed consent may be used instead of QDP where creditors are asked to make a decision about any matter, unless:
 Decision is required by QDP e.g. the approval of an IVA/ CVA; or
 The court orders decision has to be made by QDP; or
 The decision is about the remuneration of any person

Creditors are deemed to have made the decision, unless the appropriate number of relevant creditors object

Question 4

When is the decision date?

Answer 4

 In the case of a decision made by a meeting, the date of the meeting
 In the case of a decision made by a decision procedure other than a meeting or by a deemed consent procedure, the date the decision is made or deemed to have been made
 A decision made by deemed consent or decision procedure other than a meeting is treated as made at 23:59 on the decision date

Question 5

What is the notice period for a decision unless varied?

Answer 5

14 days unless:

Bankruptcy:
 7 days for the appointment of a new trustee following the removal of a trustee
 28 days for the appointment of a new trustee after resignation

CVL:
3 days for the appointment of a liquidator

Question 6

What are the standard contents of decision notices?

Answer 6

Standard contents of decision notices – R15.8
 identification details for the proceedings
 details of the decision to be made or of any resolution sought
 description of the procedure being used, and arrangements, including the venue
 the decision date
 date for submission of claims (except CVA / IVA)
 a statement that a small debt must still be proved, if that creditor wishes to vote
 opted out creditors may still vote, but must submit a proof
 special provisions where removal of a trustee or liquidator is sought
 special provisions for IVA / CVA proposals (notifying creditors of the voting rules)
 rights to request a physical meeting (where a different procedure is being used)
 time for delivering proxies (where a physical or virtual meeting is being used)
 rights of excluded persons to make a complaint (where a physical or virtual meeting is being used)
 rights of appeal in respect of conveners / chair’s decisions

Question 7

What is the threshold for an objection to deemed consent?

Answer 7

A simple 10% in value of relevant creditors

(NOT the 10% / 10% / 10 rule)

if the threshold for objections is met, the deemed consent procedure will terminate without a decision being made and if a decision is sought again on the same matter it will be sought by decision procedure

Question 8

What happens if more than 10% of relevant creditors object to a decision by deemed consent?

Answer 8

The clock stops as soon as the threshold for objections is met

The deemed consent procedure is terminated and the decision is treated as not having made

Any decision still required about the same matter must be sought using QDP:

 This will not be a physical meeting, unless requested
 EXCEPT:In an CVL – where objection automatically triggers a physical meeting

Relevant creditor for objection = creditor who is able to vote in QDP

 Objections are counted in the same manner as votes

Question 9

When can’t deemed consent be used?

Answer 9

When:
 Required to be made by QDP e.g. approval of an IVA or CVA
 About remuneration
 Where previously tried and objected to

Question 10

When can deemed consent be used?

Answer 10

to:
 Appoint a liquidator in a CVL
 Approve an administrator’s proposals
 Potentially, to vary an IVA or CVA where this doesn’t affect remuneration; and the proposal provides for it
 Replace an office holder (e.g. who is leaving the practice)
 Obtain comfort that creditors do not object to (potentially costly) litigation

Question 14

Can a vote in a DMP be changed

Answer 14

No other than at a meeting.

Question 15

When can a request for a physical meeting be made?

Answer 15

Bfore or after the notice of the decision procedure or deemed consent procedure has been delivered, but must be made not later than 5 business days after the date on which the convener delivered the notice of the decision procedure or deemed consent procedure unless these Rules provide to the contrary.

Question 16

Where a physical meeting has been requested then how long does the convener have to comply?

Answer 16

3 business days

Question 17

Does a convenor have to permit a creditor to attend a physical meeting remotely?

Answer 17

No - discretion

(a) may permit a creditor to attend a physical meeting remotely if the convener receives a request to do so in advance of the meeting; and
(b) must include in the notice of the meeting a statement explaining the convener’s discretion to permit remote attendance.

Question 18

How long can a chair adjourn a physical meeting for?

Answer 18

The chair may (and must if so resolved) adjourn a meeting for not more than 14 days

Question 19

How long may a chair suspend a physical meeting?

Answer 19

The chair may suspend a meeting for one or more periods not exceeding one hour in total

 Or for a longer period on the same day, if exceptional circumstances

Question 20

What is an excluded person?

Answer 20

R15.36
An “excludedperson”is one that has taken all steps necessary to attend a meeting under arrangements put in place by a convenor but that did not enable that person to attend the whole or part of it

Question 21

What happens if the chair becomes aware of an excluded person?

Answer 21

Chair decides what to do

Question 22

How long does an excluded person have to complain?

Answer 22

Until 4pm the day after the decision date to make a complaint to the appropriate person (Chair or convenor)

Question 23

What is a quorum in a meeting ?

Answer 23

A quorum is in the case of a meeting of creditors, at least one creditor entitled to vote;

Question 24

How long does an excluded person have to appeal a decision by the appropriate person to a complaint?

Answer 24

2 further days

Question 25

When must a chair delay the start of a meeting?

Answer 25

Where the chair is aware, either by virtue of proofs and proxies received or otherwise, that one or more additional persons would, if attending, be entitled to vote, the chair must delay the start of the meeting by at least 15 minutes after the appointed time.

Question 26

When can a proxy be used?

Answer 26

For physical meetings (not correspondence or electronic votes)

Question 27

What must a specific proxy do?

Answer 27

Direct the proxy -holder how to act at the meeting by giving specific instructions; or
 authorise the proxy-holder to act at the meeting without specific instructions; or
 contain both direction and authorisation.

Question 28

When must a proxy for a meeting be delivered to the chair?

Answer 28

Either at or before the meeting.

Question 29

What must a continuing proxy provide for?

Answer 29

A continuing proxy must authorise the proxy-holder to attend, speak, vote or abstain, or to propose resolutions without giving the proxy-holder any specific instructions how to do so.

Question 30

How can a continuing proxy be superseded?

Answer 30

A continuing proxy may be superseded by a proxy for a specific meeting or withdrawn by a written notice to the office- holder.

Question 31

When must a blank proxy form be supplied?

Answer 31

With any notice of a physical meeting.

Question 32

Where the chair is proxy holder, must they propose a resolution proposed by that creditor?

Answer 32

R16.5(3) - Where the chair holds a proxy which requires the proxy-holder to vote for a particular resolution and no other person proposes it, the chair must propose it unless there is good reason for not doing so

 R16.5(4) - If the chair does not propose such a resolution, the chair must as soon as reasonably practicable after the meeting deliver a notice of the reason why that was not done to the creditor

Question 33

Who may inspect a proxy and when?

Answer 33

R16.6(1)-A person attending a meeting is entitled, immediately before or in the course of the meeting, to inspect proxies and associated documents delivered to the the chair or to any other person in accordance with the notice convening the meeting.

R16.6(2) The chair must
 retain the proxies, where they are the office holder; or
 deliver them soon as reasonably practicable after the meeting to the office holder
 R16.6(3) - The office -holder must allow proxies to be inspected at all reasonable times on any business day by
 a creditor, in the case of proxies used at a meeting of creditors
 the debtor or the bankrupt in the case of personal insolvency proceedings

Question 34

When can’t a proxy holder vote for a resolution?

Answer 34

R16.7(1) - A proxy -holder must not vote for a resolution which would:
 (a) directly or indirectly place the proxy -holder or any associate of the proxy-holder in a position to receive any remuneration, fees or expenses from the insolvent estate; or
 (b) fix or change the amount of or the basis of any remuneration, fees or expenses receivable by the proxy-holder or any associate of the proxy- holder out of the insolvent estate
 R16.7(2) - However, a proxy-holder may vote for such a resolution described if the proxy specifically directs the proxy-holder to vote in that way.
 R16.7(3) - The office-holder is deemed to be an associate of the person acting as chair.

Question 35

Who can act as a corporate representative?

Answer 35

If a corporation is a creditor it may by resolution of its directors or other governing body authorise a person or persons to act as its representative or representatives in relation to any decision procedure of the bankrupt or debtor’s creditors held in pursuance of the Act or of these Rules.

Where the corporation authorises one person or persons, that person is entitled to exercise the same powers on behalf of the corporation as the corporation could exercise if it were an individual creditor.

NB for a corporate insolvency also includes the right to act at any meeting of the company eg a shareholder meeting.

Question 36

How does a corporate representative evidence their right?

Answer 36

A person authorised to represent a corporation (other than as proxy-holder) at a meeting of creditors must produce to the chair:
(a) the resolution conferring the authority; or
(b) a copy of that resolution certified as a true copy by
(i) two directors,
(ii) a director and the secretary or
(iii) a director in the presence of a witness who attests the director’s signature.

Question 37

When are creditors entitled to vote?

Answer 37

R15.28(1) In insolvency procedures other than a voluntary arrangement, a creditor is only entitled to vote or to object to a decision if they have:
 Delivered a proof
 Which was received not later than the decision date, or
 In the case of a meeting, 4pm on the business day before the meeting or
 In the case of a meeting, the chair is content to accept the late proof; AND
 The proof has been admitted for the purposes of entitlement to vote

In a decision relating to a proposed CVA or IVA every creditor, secured or unsecured, who has notice of the decision procedure is entitled to vote.

In the case of a meeting, a proxy-holder is not entitled to vote on behalf of a creditor unless the convener or chair has received the proxy intended to be used on behalf of that creditor.

Question 38

How much can a creditor claim in an administration for voting purposes?

Answer 38

as at the date on which the company entered administration, less:
 any payments that have been made to the creditor after that date in respect of the claim, and
 any adjustment by way of set-off which has been made in accordance or would have been made if the rule were applied on the date on which the votes are counted

Question 39

Calculation of voting rights in an administrative receivership?

Answer 39

As at the date of the appointment of the receiver, less any payments that have been made to the creditor after that date in respect of the claim

Question 40

Calculation of voting rights – unliquidated or unascertained amounts

Answer 40

15.31(2) Insolvency procedures other than voluntary arrangements:
A creditor may vote in respect of a debt of an unliquidated or unascertained amount if the convener or chair decides to put upon it an estimated minimum value for the purpose of entitlement to vote and admits the claim for that purpose.
 R15.31(3) But in relation to a proposed CVA or IVA, a debt of an unliquidated or unascertained amount is to be valued at £1 for the purposes of voting unless the convener or chair or an appointed person decides to put a higher value on it.

Question 41

What is the requisite majority for an administration?

Answer 41

A decision is not made if those voting against it:
 include more than half in value of the creditors to whom notice of the decision
procedure was delivered; and
 are not, to the best of the convener or chair’s belief, persons connected with the company.

Question 42

What is the requisite majority for a voluntary arrangement?

Answer 42

Decision is made when 75% of those responding vote in favour of it:
 CVA: A decision to approve CVA a decision is not made if more than half of the total value of the unconnected creditors vote against it
 IVA: A decision is not made if more than half of the total value of creditors who are not associates of the debtor vote against it.

Question 43

Who can appeal the chair’s decision and how?

Answer 43

Appeal to the court by a creditor, by a contributory, or by the bankrupt or debtor

Question 44

How long does a creditor, contributory or debt have to appeal a decision by the chair or convenor?

Answer 44

21 days
EXCEPT CVA or IVA 28 days

Question 45

What must be included in the record of a decision?

Answer 45

The record must identify the proceedings, and must include
 a list of the names of the creditors who participated and their claims;
 where a decision is taken on the election of members of a creditors’ committee the names and addresses of those elected
 a record of any change to the result of the resolution consequential to complaint made by an excluded person and the reason for any such change; and
 in any case, a record of every decision made and how creditors voted.