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If you are in a situation with your business where you can no longer continue trading and owe a number of creditors money, then you will need to start insolvency proceedings including a creditors meeting, but what happens in a creditors meeting? As insolvency Practitioners we are called in at the beginning of insolvency procedures, therefore, we will be present at the creditors meetings and be able to help you make arrangements with creditors. Creditors meetings seem like a scary prospect but they are in fact very professional and your Insolvency Practitioner will be able to manage the meetings and get the best outcome possible for all parties involved. Remember that creditors are often very cooperative as they want to recoup some money and the alternative could be that they get back nothing. With this in mind creditors meetings tend to be professional and amicable.
If your company is not able to meet financial obligations, such as loans, debts, tax etc then an option would be to wind down the company or set up an agreement with creditors. When you are struggling with debt you are very emotional about the situation and imagine your creditors to be the same, in some instances this may be true but most of the time creditors just want to recoup some of the debt, as much of the debt, and their full cooperation enables this. For proceedings to go smoothly it is best to use an insolvency practitioner to contact the creditors and hold the meeting, this way they can make sure everything remains professional and things can be resolved quickly and efficiently. Your accountant or other directors may be able to recommend an IP, or you can talk to us directly for free insolvency advice.
Three Meetings about the solvency of the company
In most cases, there will be 3 meetings to discuss the solvency of the company. They are as follows:
- The company board Meeting
- The Shareholders Meeting (Members Meeting)
- The Creditors Meeting
Company Board Meeting
The company will have a board meeting, during which they will decide upon how the business is performing, looking at turnover, profits and debts. If the company is found to be insolvent the directors will give notice that the company will be wound up. When notice is given, all creditors, including banks, will be sent a notice and they will be able to attend the creditors meeting or find a representative to vote at the creditors meeting if they are not able to attend, many banks will have an appointed IP,r accountant or solicitor whom they use regularly.
The second meeting is a members (shareholders) meeting where the directors and shareholders will decide to appoint a liquidator or IP.
The third meeting is the creditor’s meeting when they either confirm the appointed liquidator or not. They can make their own choice of liquidator if there are sufficient votes in favour. The director, as chairman, conducts the meeting with guidance from the liquidator and reports on the state of the company’s affairs and the reasons for its failure. Creditors are entitled to ask for further information and to pose questions. Sometimes creditors can make informal deals with the directors personally. A resolution will be put to the meeting to approve the remuneration of the liquidator. When these meetings have taken place your duties as a director will cease and your appointed liquidator will take over control of the company’s affairs until it is finally wound up. Once the appointment is confirmed, it is the liquidator’s responsibility to realise the assets of the company and distribute them in accordance with the Insolvency Act 1986. From this point on the liquidator acts solely in the interests of the creditors. She must take into consideration the rights of secured creditors and preferential creditors prior to payment to unsecured creditors. It is also the liquidator’s responsibility to investigate the company’s affairs and report on the conduct of the directors.
Liquidation of the company
The liquidator will investigate the directors’ conduct and can bring a number of actions including wrongful trading and fraudulent behaviour. These are serious forms of misconduct and could lead to disqualification from being a company director for up to 15 year. So there is nothing to be fearful about particularly as the meeting is carefully controlled by the licensed insolvency practitioner. If you’d like further discussions on what occurs, please get in touch. Very often it’s the decision as to whether or not the company is insolvent that kicks off this process.