Getting involved will help achieve the best possible outcome for you
Why you should get involved
Losing money you are owed by a company or an individual that has become insolvent can be a difficult, stressful and time-consuming situation. But, getting involved in the procedure means you are much more likely to get the outcome that you deserve, because:
Getting your money back If the Office Holder knows who you are, knows how much you are owed and knows about your relationship with the insolvent party, you stand a much better chance of getting some of your money back. In most instances if you are an unsecured creditor you are unlikely to get back all that you are owed, and unfortunately might not get any money returned at all; but being involved gives you a much better chance than if the Office Holder isn’t aware you have a claim in the first place. Importantly, if you have ‘Retention of Title’ terms in your contract with the debtor you should approach the Office Holder as soon as possible and advise them of your rights. Also, if you have any information about the whereabouts of assets, or actions the Office Holder could take to improve realisations, share it with them – it may result in a better outcome for you.Bringing directors who have committed bad practice to justice Sometimes those working for insolvent companies have done something which has made matters worse. This can be anything from borrowing money from the company to committing fraud. These people will only be brought to justice if the insolvency practitioner is aware of those actions. However, it’s not always obvious to the insolvency practitioner that there has been bad practice; they often rely on creditors to tell them – this is another reason why you are so important to the insolvency procedure.
Finding out about an insolvency
Finding out that an insolvency procedure has begun is the first part of engaging as a creditor.
There are several ways to find out if an individual or company, who owes you money, has entered an insolvency procedure:
Creditor actions The first is easy: because you, as someone who is owed a debt that hasn’t been paid, have asked the court to make an individual bankrupt or because you’ve asked the court to ‘wind-up’ a company. You can read more about how to go about doing this on the government’s website here (bankruptcy) and here (winding-up a company).Being contacted by an office holder If you have not been involved in starting insolvency proceedings, it is most likely that you will find out an insolvency procedure has begun because the Office Holder dealing with the case has contacted you.
Once they are appointed, an Office Holder will try to find out who the insolvent individual or company owes money to. To do this, they will principally rely on information provided by the insolvent individual or company’s directors. They will also go through the insolvent individual’s or company’s financial records and their correspondence, including letters and emails.
Once the Office Holder has established who they think the creditors are, they will contact the creditors to let them know an insolvency procedure has begun (this will most likely be by post). The Office Holder may also invite the creditors to a creditors’ meeting. A creditors’ meeting may not always be held, although creditors can make a request for the Office Holder to hold one.Other ways to find out Unfortunately, it is not always possible for the Office Holder to identify everyone that is owed money by an insolvent company or individual.
If you are aware of an insolvent individual or company that owes you money, and you have not been contacted by an Office Holder, it is important that you get in touch with them to lodge your ‘claim’ for how much you are owed. Unless you have lodged your claim with an Office Holder, you will not be able to take part in the insolvency procedure, and you might not have any money returned to you.
There are a number of ways you can find out the name and contact details of the Office Holder you need to speak to.
If you are trying to find out the name of an Office Holder in an individual insolvency in England and Wales, you should check the Insolvency Service’s ‘Individual Insolvency Register’. In Scotland, you should check the Register of Insolvencies.
To find out who has been appointed to deal with an insolvent company, you should check national or local press reports or search the ‘Gazette’ (the Gazette is the UK’s official ‘journal of public record’). Separate editions are published in London (covering England and Wales), Edinburgh, and Belfast.
The information you need to hand
It is very important that you can prove to the Office Holder that you are owed money by an insolvent company or individual. Once the Office Holder has this proof, they can process your claim.
You can request a ‘proof of debt’ form (also known as a statement of claim form) from an Office Holder (although you should have been provided with one when they first contacted you).
The information you might need to give to an Office Holder includes things like invoices, correspondence, or financial statements.
Things can get a little bit more complicated if you have a ‘Retention of Title’ claim. If you have a Retention of Title claim (often abbreviated to ROT), you should send a copy of your terms and conditions to the insolvency practitioner.
Insolvency practitioners have the power to investigate any wrongdoing by an insolvent company or individual. If you are aware of any wrongdoing by a company or individual that relates to their insolvency, you should tell the insolvency practitioner. The insolvency practitioner will be guided by input from creditors.
Examples of ‘wrongdoing’ include:
• Trading while the directors knew or should have known that the company could not avoid insolvency;
• Fraud by a company’s directors
• Hiding assets, like cars, houses, boats, or jewellery;
• Transferring assets to others (for free or for a price below their true value) before an insolvency procedure began
The information you will receive
Because the Office Holder is responsible to the creditors in an insolvency, they will make regular reports to either keep creditors up-to-date with what is happening or to explain to creditors why they have made a particular decision.
Information might be posted directly to creditors or hosted on a secure website (to save on postage costs). See "use of websites" below.
You may receive the following updates from an Office Holder:
Proving a debt
Meeting and Proxy Notices
SIP 16 'pre-pack administrations'
Final Report or Account
If you have not received any of the above information, if you need help completing various forms, or if you have questions about any of the above information, please speak to the Office Holder handling the insolvency in which you are a creditor.
Attending a meeting of creditors
A meeting of creditors allows participants to communicate with each other and vote on an issue. They can be physical meetings where participants are in the present in the same geographical location or virtual meetings where participants might be using an online system to communicate.
A creditors’ meeting is very important. It is a chance for you to:
• Approve the appointment of an insolvency practitioner (or request that an alternative is appointed);
• Approve the proposals made by the insolvency practitioner or Official Receiver regarding how they intend to handle the insolvency;
• Approve the proposals for how the insolvency practitioner will be paid;
• Quiz the individual or the company’ directors;
If you can’t attend a physical meeting of creditors in person, you are allowed to send someone in your place as a ‘proxy’. Your proxy can vote and ask questions on your behalf. Several insolvency firms offer proxy services for their clients.
Creditors’ meetings might be held at the very beginning of an insolvency procedure or later on in the insolvency process when a key issue needs to be decided upon by you as a creditor. In compulsory liquidations, bankruptcies, or administrations the first Decision Procedure usually takes place a while after the procedure has started.
As mentioned above Creditors' meetings are not automatically held by an Office Holder, but creditors can request one (a combination of creditors owed at least 10% in value, 10% in number or 10 individual creditors. In a Scottish sequestration the requisite amount is 25%). Requests for a meeting to be held must be made to the Office Holder in writing.
Approving the appointment of the insolvency practitioner
Approving the proposals made by the insolvency practitioner
Approving the proposals for how the insolvency practitioner will be paid
Asking the debtor or the directors of the insolvent company questions
Approve the formation of a creditors’ committee
Different insolvency procedures and their meetings
Joining the creditors’ committee
The Office Holder should inform creditors that they can form a creditors' committee and will give advice on how to do this. Membership is voted on by creditors during a "Decision Procedure" and it is up to creditors whether or not one is formed. If a creditors' committee is formed, its members will act on behald of all creditors. Decisions on the case are ultimately the responsibility of the insolvency practitioner, however, the committee is principally there to give advice and agree and approve the insolvency practitioner's fees. In liquidations, some actions may need to be approved by the committee.
Depending on the type of insolvency procedure, creditors may be invited to form a committee at pivotal stages during the procedure (such as when an administrator is presenting his proposals) or whenever any decision procedure is being put to creditors (in a bankruptcy or CVL).
A creditors’ committee is usually made up of between three and five creditors. In Scotland in a personal bankruptcy case a single ‘Commissioner’ can be appointed. These creditors are volunteers and they represent the creditors’ interests on a ongoing basis.
It is unlikely that there would be a creditors’ committee in an insolvency involving an Official Receiver.
Members of the creditors’ committee are approved by the other creditors. They must not be a creditor whose claim has been rejected by the insolvency practitioner, and they must not be someone currently in a bankruptcy, or someone who has a conflict of interest.
The creditors' committee is usually chosen at the first decision procedure, however creditors will have an opportunity to form one at every subsequent one.
The creditors’ committee is there to:
• Provide the insolvency practitioner with information that will help them trace and collect the insolvent individual’s or company’s assets;
• Identify behaviour that might give the Insolvency Service grounds to seek to disqualify directors from running a company (the insolvency practitioner will file a report on the director to the Insolvency Service);
• Oversee and scrutinise the insolvency practitioner’s work and fees;
• Approving the insolvency practitioner's proposals to take certain actions;
• Provide advice to the insolvency practitioner.
Creditors’ committee members are not paid, but any travel expenses incurred will be treated as a cost of the insolvency in England and Wales (i.e. expenses will be paid out of the remaining assets of the insolvent company or individual after secured creditors receive what they are owed). These expenses cannot be recovered from a bankruptcy in Scotland.
Further information about creditors' committees can be found in R3's guide for creditors (see here)
Keeping an eye on insolvency practitioners’ fees
The insolvency practitioner or Official Receiver will normally report to creditors annually (in some insolvency procedures such as administrations in England and Wales, every six months), detailing what funds they have collected, what debts they have been able to repay, and how much they have charged.
If fees are being charged on a ‘time-cost’ basis, the insolvency practitioner will have provided an upfront estimate and will later report on: what hourly fees have been charged; what work has been carried out; and the benefit of that work for creditors. Insolvency practitioners might also detail the work for which they have charged that doesn’t directly benefit creditors but is legally required.
If there is a creditors' committee, it is up to this committee to oversee the fees being charged by the insolvency practitioner.
If the insolvency practitioner wishes to charge fees above those set out in the initial estimate, they will have to seek creditors' permission to do so.
If there is a creditors’ committee, it is up to this committee to oversee the fees being charged by the insolvency practitioner.
If, during the course of an insolvency and there is no creditors’ committee, you are unhappy with the fees being charged by an insolvency practitioner you may call a creditors’ meeting or go to court to challenge them (provided this is done by a combination of creditors owed 10% of the debtor’s debts or 25% of the debtors debts in a Scottish liquidation). Creditors can also ask for further details of fees.
Repayments will usually arrive in the form of a cheque. If you would prefer to receive an electronic payment, you should tell the Office Holder.
If there is money to distribute amongst creditors, secured creditors will be paid first and unsecured creditors last (if there is enough money to go around).
Concerns over the conduct of an Official Receiver or insolvency practitioner
Complaints about Official Receivers or government agencies in charge of insolvency should be directed to the relevant government agency in England and Wales (Insolvency Service), Scotland (Accountant in Bankruptcy) and Northern Ireland (Insolvency Service Northern Ireland).
If you have a complaint about an insolvency practitioner operating anywhere in Great Britain, you should use the Insolvency Service’s ‘Complaints Gateway’.
Although you will make your complaint through the ‘Complaints Gateway’, the complaint will be handled by the relevant regulator. Each insolvency practitioner is regulated by one of eight professional bodies:
You can find out which professional body regulates which insolvency practitioner using the Insolvency Service’s directory.