{"id":164,"date":"2017-02-09T16:22:01","date_gmt":"2017-02-09T16:22:01","guid":{"rendered":"http:\/\/thecompliancealliance.co.uk\/blog\/?p=164"},"modified":"2018-04-23T14:07:58","modified_gmt":"2018-04-23T14:07:58","slug":"part-15-decisions","status":"publish","type":"post","link":"https:\/\/thecompliancealliance.co.uk\/blog\/2016-rules\/part-15-decisions\/","title":{"rendered":"New Rules, Part 15: Decisions, Decisions!"},"content":{"rendered":"<p>More than one IP has asked me: ok, I know the New Rules pretty-much remove creditors\u2019 meetings, but what\u2019s all the fuss about? It gets me every time! Not only are the changes far more widespread than this, but also <em>this <\/em>change is hardly <em>simple<\/em>. It sounds simple though, doesn\u2019t it: just replace all creditors\u2019 resolutions with some kind of postal vote?<\/p>\n<p>From what I believe was a desire to provide options \u2013 to creditors mainly, but also to directors and IPs \u2013 has evolved a web of overlapping timescales and feedback mechanisms, not to mention reams more information to creditors, which cannot fail to bamboozle and further dissuade them from engaging.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Decision 1: what type of decision do you have?<\/strong><\/p>\n<p>The SBEEA15 introduced the idea of two tiers of decisions (by the way, in our new world, there are few resolutions anymore, just decisions\u2026 although some decisions <em>are <\/em>made by resolution, if considered at a meeting, whether physical or virtual). There are decisions that can be made by Deemed Consent and others that must be made by a Qualifying Decision Procedure (although the New Rules drop the \u201cQualifying\u201d bit). In the latter category are:<\/p>\n<ul>\n<li>any \u201cdecision about the remuneration of any person\u201d (S246ZE(2)); and<\/li>\n<li>the acceptance of IVA and CVA Proposals.<\/li>\n<\/ul>\n<p>So what decisions might be dealt with by Deemed Consent? The biggie is the appointment of a CVL Liquidator (you might also have thought about the appointment of an IP in court cases, but this involves first the removal of the incumbent OR \u2013 aha, now the reason for the change so that the OR becomes Trustee immediately on the order becomes clear, doesn\u2019t it..?). Other Deemed Consent decisions could include several ADM items, e.g. extensions, discharge and even the Proposals themselves. But other than these, Deemed Consent is unlikely to get out much.<\/p>\n<p>I think the Insolvency Service saw Deemed Consent being useful to office holders in seeking creditors\u2019 approval to certain strategies, e.g. to commence litigation. I agree that this is a possibility, however the abolition of the statutory requirement to seek sanction to exercise many old Schedule powers has meant that more often than not IPs feel empowered to take such decisions in the interests of creditors in any event.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Decision 2: should you use Deemed Consent?<\/strong><\/p>\n<p>The key point to note about Deemed Consent is that, unless more than 10% in value of creditors (entitled to vote) positively object to the decision, then it is approved as proposed. If this proportion of creditors objects, then the IP has another bite of the cherry by proposing the decision by one of the other decision processes (excluding a physical meeting unless the proposed decision is for your CVL appointment).<\/p>\n<p>There is a wrinkle: creditors who meet <em>different <\/em>criteria can respond by asking for a physical meeting, rather than (or in addition to) objecting to the decision proposed by Deemed Consent. If this happens, then the Insolvency Service has stated that the Deemed Consent process is superseded and the decision must be considered at a physical meeting. Personally, I have failed to spot where this consequence is set out in the rules, so I have asked the Service for clarification.<\/p>\n<p>The thresholds for seeking a physical meeting are either 10% in value of creditors, 10% in number, or 10 creditors (the \u201c10\/10\/10\u201d criteria). This time, the criteria relate to <em>all <\/em>creditors, not just those entitled to vote.\u00a0 (UPDATE 23\/03\/17: recently-issued Amendment Rules affect this, although their application is unclear.\u00a0 I have blogged a question on the Insolvency Service&#8217;s blog.)\u00a0Thus it seems to me more than just a theoretic possibility that a creditor\/s might reach the threshold to seek a physical meeting but fall short of the threshold to object to a Deemed Consent decision\u2026 hence the need, I believe, for the rules to be clear on the consequences of a request for a physical meeting.\u00a0 (UPDATE 02\/05\/2017: the Insolvency Service has blogged: \u201cThe intention here is that the creditors that have an interest in the decision being taken are the ones who determine whether the costs of holding a physical meeting should be incurred. Therefore the convener would consider the value of the potential vote of the creditor(s) making the request, and compare them to the total value of the potential vote.\u201d\u00a0 Got that? \ud83d\ude09 )<\/p>\n<p>Whilst there are potential complications, I think the Deemed Consent advantages are clear, especially where you need to seek approval from uninterested creditors, e.g. the ADM extension and discharge questions (although if you need secured creditors\u2019 approval, silence from the unsecureds is only half the battle won).<\/p>\n<p>What if you are seeking a CVL appointment, should you go for Deemed Consent? Well, one downside is that you will need to add on another decision procedure if you want to get your fees, including your pre-appointment fee, approved. However, if another IP starts showing an interest, they will first have to object to the Deemed Consent process before the scene is re-set to count votes on nominations. Granted however, it may mean that you\u2019re looking at an unexpected Centrebind.<\/p>\n<p>Another strange characteristic of seeking a CVL appointment by Deemed Consent is that, if unopposed, there is no statutory requirement for any pre-appointment Gazette notice \u2013 how odd is that?!<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Decision 3: which other Decision Procedure might you use?<\/strong><\/p>\n<p>How else might you seek a decision? In the order that I think they will be used, the methods are:<\/p>\n<ul>\n<li>vote by correspondence (no longer a \u201cmeeting\u201d by correspondence and not defined in the rules);<\/li>\n<li>virtual meeting (yes, cumbersome and in some respects risky, but the only way effectively to negotiate decisions);<\/li>\n<li>electronic voting (hmm\u2026 maybe not for some time yet);<\/li>\n<li>only if sufficient creditors request it, a physical meeting;<\/li>\n<li>and A N Other process that none of us has yet thought up.<\/li>\n<\/ul>\n<p>Virtual meetings are prepared for pretty-much as physical meetings are now: they require Gazetting and they involve proxy forms, which can be delivered anytime up to the start of the meeting in any case, no longer just for VA meetings. Proofs of debt also need to be delivered and, although there is a deadline of 4pm the business day before the meeting, there is also provision for the chair to accept late proofs, if he is \u201ccontent\u201d.<\/p>\n<p>Of course, the obvious difference is finding an appropriate virtual meeting resource. From those who I know have been exploring this, I understand that there is no clear winner. Issues include: being able to identify attendees, especially when they join and leave, and being able to block access to people not entitled to attend. The main risk in holding a virtual meeting is that an \u201cexcluded person\u201d (i.e. someone who tried to participate but could not through no fault of their own; say, they just happen to live in an area of the UK with unreliable broadband connections) can influence the decision <em>after <\/em>the meeting (assuming you did not decide to adjourn it). They are given a very short window of opportunity to complain that, had they participated, they would have swung the vote, but this is clearly not an uncertainty you want to be left with after a decision on your appointment or on a VA Proposal. There is also the practical uncertainty in knowing how many people are likely to want to join in to a virtual meeting: multi-party conference calls are exasperating at the best of times and the prospects of being surprised by a virtual room full of fired-up creditors doesn\u2019t bear thinking about.<\/p>\n<p>So should you go for a correspondence vote? Well, if you\u2019re looking for a CVL appointment, it\u2019s worth clocking now that this is not an option: Deemed Consent and virtual meeting are your only options. It is also worth remembering that the deadline for correspondence votes (and other non-meeting processes, including Deemed Consent) is one minute to midnight on your chosen day (the \u201cDecision Date\u201d), so we will have to get used to not knowing the outcome of a proposed decision until the day <em>after<\/em>\u2026 which could prove challenging if you\u2019re trying to coordinate it alongside a members\u2019 meeting. Correspondence votes need to be supported by proofs of debt submitted by the Decision Date and importantly, once a vote has been lodged, it cannot be changed. This makes correspondence vote a risky choice for VA Proposals, I think. I also wonder where correspondence votes will get us on fee approvals: if there is no negotiating possible, then will it result in an increase in court applications?<\/p>\n<p>As with Deemed Consent, on receiving an invitation to a virtual meeting or to vote by another means, a creditor may react by asking for a physical meeting. They have 5 business days after <em>delivery <\/em>of the notice of the decision procedure in which to have <em>delivered<\/em> a request (but see Timetables below) and the 10\/10\/10 thresholds apply.<\/p>\n<p>There is also no ability to ask creditors for a deposit as security for the costs of convening a physical meeting on request\u2026 unless it is a <em>requisitioned <\/em>decision (yes, there is a difference!). The latter may arise for example as a consequence of issuing Para 52 Proposals, although the rules allow you only to ask for the costs of seeking a \u201cdecision\u201d, not a physical meeting\u2026 however it is not clear whether creditors could ask explicitly for a physical meeting at this stage (that\u2019s another question to the Insolvency Service).\u00a0 \u00a0(UPDATE 02\/05\/2017: the Insolvency Service has blogged that they think it is reasonable to interpret the rules as allowing the creditor to request a physical meeting at the same time as requisitioning a decision, although they have also confirmed that the deposit sought should only be for requesting a <em>decision<\/em>, not holding a physical meeting.)<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Invitations to Form a Committee<\/strong><\/p>\n<p>In all cases (except, strangely, in Compulsory Liquidations unless the meeting is to appoint a liquidator), whenever a Deemed Consent or decision procedure notice is issued, creditors must be asked at the same time whether they wish to establish a Committee and to propose nominations. This requirement sits unhappily besides the other rules, especially the Deemed Consent process. For starters, how do you ask creditors \u201cwhether\u201d they want something? You must propose it as a decision, e.g. I propose the decision that a Committee be established. But if you were to propose this as a Deemed Consent decision and received no objections, this would mean that the decision had been made and you would need to canvass for (more) nominations, thus postponing your original objective until the sorry \u201cno we didn\u2019t mean we wanted a Committee, we simply don\u2019t care\u201d response was made certain. Therefore, several have designed the proposed decision in the negative: I propose the decision that a Committee should not be established (which personally I think also sits better ethically where the IP does not believe a Committee is warranted: is it honest and straightforward for an IP to propose a decision he does not himself desire?). In this case, creditors\u2019 silence works well.<\/p>\n<p>But is it truly necessary to go through this rigmarole every time you propose a decision? Yes, it seems so. And of course we will need to highlight the SIP15 Committee Guidance\u2026 however I am puzzled by the SIP15 reference to highlighting it <em>prior to <\/em>inviting creditors for nominations: does this mean that we need to write to creditors separately <em>before <\/em>our first proposed decision? For once, this is not a question for the Insolvency Service!<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Timetables<\/strong><\/p>\n<p>In most cases, notice of a decision \u2013 by Deemed Consent or other process \u2013 must be at least 14 days (plus delivery time). CVL appointment is the obvious exception: in this case, notice must be 3 business days after delivery, which including a weekend makes it very slightly shorter than the current requirement. Because of the short timescale in CVL appointments, requests for a physical meeting can be made at any time up to the Decision Date.\u00a0 (UPDATE 02\/05\/2017: oops!\u00a0 Sorry, the rules set the deadline as <em>between<\/em> the notice and the Decision Date and Dear IP 76 suggests that the Decision Date is not included in this period.\u00a0 See\u00a0<a href=\"https:\/\/goo.gl\/MCPh08\"><span style=\"color: #006600;\">https:\/\/goo.gl\/MCPh08<\/span><\/a> for more analysis.)<\/p>\n<p>&nbsp;<\/p>\n<p><strong>T<\/strong><strong>here\u2019s more<\/strong><\/p>\n<p>The rules contain prescriptive details about the content of notices, how to deal with \u201cexcluded persons\u201d. In addition, the interaction of Deemed Consent\/decision procedures with other requirements such as the need to send a Statement of Affairs before the CVL appointment Decision Date adds another layer of complexity to the work.<\/p>\n<p>If you want to know more:<\/p>\n<ul>\n<li>on the detail of decision processes especially in the context of CVL appointments, then access Jo Harris\u2019 webinar, \u201cNew Rules: Decision Procedures and Changes on CVL Appointments\u201d (email info@thecompliancealliance.co.uk for details);<\/li>\n<li>on the pros, cons and strategies of decision processes, then join me at the R3 breakfast seminar, The New Rules for Insolvency Work-Winners (16 March in London), or any of the three R3 SPG Technical Reviews (28 March in London, 6 June in Huddersfield, 4 July in Bristol)\u2026 and there are more Compliance Alliance webinars to come on these topics;<\/li>\n<\/ul>\n<p>\u2026 or feel free to get in touch with either Jo or me\u2026 but don\u2019t expect many simple answers!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>More than one IP has asked me: ok, I know the New Rules pretty-much remove creditors\u2019 meetings, but what\u2019s all the fuss about? It gets me every time! Not only are the changes far more widespread than this, but also &hellip; <a href=\"https:\/\/thecompliancealliance.co.uk\/blog\/2016-rules\/part-15-decisions\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[73],"tags":[74,82,80,62,81],"class_list":["post-164","post","type-post","status-publish","format-standard","hentry","category-2016-rules","tag-2016-insolvency-rules","tag-committee","tag-decision-procedures","tag-deemed-consent","tag-virtual-meeting"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p6i4jv-2E","_links":{"self":[{"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/posts\/164","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=164"}],"version-history":[{"count":4,"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/posts\/164\/revisions"}],"predecessor-version":[{"id":221,"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/posts\/164\/revisions\/221"}],"wp:attachment":[{"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=164"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=164"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thecompliancealliance.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=164"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}