The recent insolvency law changes greatly increase the rights and powers of creditors to receive information about and intervene in the course of external administrations if they are dissatisfied with the incumbent’s conduct.
The majority of the Insolvency Law Reform Act (ILRA) amendments relating to creditor rights commenced operation on 1 September 2017. These changes significantly impact Voluntary Administrations (VA), Deeds of Company Arrangement (DOCA) and Liquidations (collectively known as external administrations), and to a lesser extent Receiverships.
Key changes include:
- Right to request a meeting
The meeting must be convened by the external administrator as soon as ‘reasonably practicable’ after request from the creditor body or a single large creditor (at least 10% of the total value). However, a request may be deemed unreasonable if for example, it prejudices creditors’ interest or a meeting has already been held recently.
- Right to request information or access to records at any time
Information must be provided within 5 business days of receiving the request. Request may be deemed unreasonable if information is privileged or results in a breach of confidence.
- Right to give directions to an Administrator/Liquidator
Directions may be given by a resolution of creditors (not individual creditors) and should be considered but need not be complied with, although the Administrator/Liquidator must document their reasons for not following the directions.
- Right to appoint a reviewing liquidator to review fees of Administrator/Liquidator
Creditors by resolution may initiate a review of remuneration approved within 6 months and expenses incurred within 12 months, prior to the appointment of the reviewing Liquidator.
- Right to replace an Administrator/Liquidator
Creditors may pass a resolution to change the incumbent Administrator/Liquidator which may pass on the voices or may require creditors in number and value to vote in favour, if a creditor or the incumbent call for a poll.
The changes provide creditors with new and powerful tools to get information about companies in external administration and if they are dissatisfied with the conduct of the incumbent, look to replace them with their own nominee.