creditor voting at the first and
second creditors' meeting.
Creditors’ meetings are key steps in voluntary administration. They allow the administrator and creditors to come together to determine the most effective course of action to secure an insolvent company’s future.
There are two meetings that take place during a voluntary administration process.
First creditors’ meeting
Held within eight business days from the commencement of the voluntary administration process, the first meeting is for creditors to decide whether they want to form a ‘committee of inspection’, and whether they want the existing administrator to be removed and replaced.
A committee of inspection is formed to assist, advise and monitor the conduct of the administrator. A creditor who wishes to replace the administrator can motion to do so at this meeting, but must be prepared with a registered liquidator before the meeting and get a written consent from that person that they would be prepared to act as administrator. However, the administrator can only be replaced if the resolution is passed by the majority of creditors at the meeting.
Second creditors’ meeting
This meeting is held exactly five weeks after the company goes into voluntary administration and involves creditors and the administrator coming to a decision about the insolvent company. The meeting takes place after the administrator has conducted their investigations of the insolvent company’s affairs and written a report on their findings. The meeting’s format is dedicated to creditors and the administrator discussing the options, based on the investigation report, surrounding the insolvent company’s future.
Voting at Creditors' Meetings
The voluntary administration process fundamentally involves creditors agreeing on the future of the company at the second creditors’ meeting.
Creditors may participate in meetings in person, by teleconference, or via video link (if that facility is available).
A resolution put to the vote of a meeting must be decided by majority on the voices unless a poll is demanded by the chairperson or a creditor.
Where a poll is taken, a resolution is carried if:
- A majority in number of the creditors vote in favour; and
- If the value of the debts owed by the corporation to those voting in favour of the resolution is more than half the total owed to all the creditors participating in the poll.
If a vote results in a deadlock, the chairperson may resolve the deadlock by exercising a casting vote.
Where the outcome is determined by the exercise of the chairperson’s casting vote, any creditor may apply to the court for a review of the outcome and appropriate order.
If a creditor believes that the outcome of a meeting has been unfairly influenced by the votes of creditors who are associated entities of the company, the creditor may apply to the court for resolutions to be set aside.
Secured creditors may vote at creditors’ meetings in respect of their debts without forfeiting their security.
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