PART 9
March 2014
CREDITORS’ AND CONTRIBUTORIES’ RIGHTS
40.185 Creditors’ rights – general
In addition to having the right to participate in a dividend from the estate (assuming the debt is provable – see Part 3), creditors have certain other rights in relation to insolvency proceedings, as follows:
This Part also covers the rights of contributories, where indicated.
40.186 Right to present a petition - company
A creditor, or creditors, contributory or contributories, may petition the court for the winding up of a company [note 1]. In this context, the term ‘creditor’ includes contingent and prospective creditors (see paragraph 40.9), who may petition on the grounds that it is just and equitable that the company be would up [note 2] [note 3].
Further guidance on the presentation of petitions is provided in Chapter 45.
40.187 Right to present a petition - bankruptcy
A petition for a bankruptcy order against an individual may be presented by a creditor or jointly by more than one creditor [note 4]. The petitioning creditor or each of the petitioning creditors must be a person to whom the debt or (as the case may be) at least one of the debts is owed [note 5].
Further guidance on the presentation of petitions is provided in Chapter 45.
40.188 Right to a copy of the petition – company only
Every creditor or contributory of the company is entitled to be furnished by the solicitor for the petitioner (or by the petitioner him/herself, if acting in person) with a copy of the petition within two business days after requesting if, on payment of the appropriate fee [note 6].
There is no equivalent provision in bankruptcy.
40.189 Right to inspect proofs
The liquidator or trustee is under a duty, so long as the lodged proofs of debt (see paragraph 40.15) are in his/her hands, to allow them to be inspected, at all reasonable times on any business day, by any creditor who has submitted a valid proof, or any contributory, or any person acting for such a party [note 7] [note 8].
40.190 Right to inspect court file
Any person stating in writing to be a creditor of the insolvent may inspect the court file of the proceedings. In cases where the petition was presented on or after 6 April 2010, the person may also obtain from the court a copy of any documents on the court file [note 9].
Such a right is also exercisable by contributories of the company [note 10] and by any authorised representative of either a creditor or a contributory [note 11].
The court can direct that certain documents are not open to inspection without the permission of the court [note 12].
An application for the court to exercise such redaction of the file can be made by the official receiver, the office-holder or any person appearing to the court to have an interest [note 13].
Further guidance on the right to inspect the court file can be found in Chapter 47, Part 7.
40.191 Right to inspect records – company only
The court may, at any time after the making of a winding-up order, make an order, that it thinks just, that the books and records of the company may be inspected by a creditor or contributory [note 14] (but see paragraph 47.64 regarding the official receiver’s discretion to provide access to the records without permission of the court).
Permission of the court to inspect the records is not required where a government department (or a person acting under that authority), being a creditor, has a separate statutory right to inspect the records [note 15].
Further guidance on this can be found in Chapter 47, Part 6.
There is no equivalent provision in bankruptcy. Should a creditor in a bankruptcy case request inspection of the bankrupt’s records, the official receiver should seek the bankrupt’s written consent to the creditor’s inspection (see paragraph 47.64).
40.192 Creditor’s right to receive a list of creditors
A creditor has the right to require an office-holder to provide a list of creditors and the amounts of their respective debts [note 16] unless a statement of affairs has been delivered to Companies House (in liquidation) or filed with the court (in bankruptcy) [note 17].
Where required, the office-holder must as soon as reasonably practicable send it to the person requiring the list and may charge an appropriate fee for doing so.
Simply because the rules allow the official receiver, as office-holder, to direct the creditor to another source of the information does not mean (by expression or implication) that he/she is prohibited from providing a list to the creditor (or his/her properly authorised representative) and, in the interest of customer care the official receiver should endeavour to comply with any valid requests.
40.193 Right to receive a report of the insolvent’s affairs
The official receiver is required at least once after the making of a winding-up order or bankruptcy order to report to creditors and contributories on the proceedings and on the position of the insolvent’s affairs [note 18] [note 19].
See Chapter 18 for guidance on reports to creditors.
40.194 Provision of a list of creditors or report to creditors to insolvency practitioners
Insolvency practitioners should be provided with a list of creditors (see paragraph 40.192) and/or a report to creditors (see paragraph 40.193) where they can show that they act for a creditor in the insolvency. This can be done by specific authority from the creditor, the submission of a claim on behalf of the creditor, or by a ‘blanket’ authority – the details of which can be verified on the intranet (see http://intranet/OR/TechnicalSection/Blanket%20Authorities/Centrally%20Managed%20Pa.htm).
40.195 Creditor’s right to request a meeting to appoint a liquidator
If a request to call a meeting to appoint a liquidator is made with the concurrence of not less than one-quarter, in value, of the creditors, it is the duty of the official receiver to call such a meeting [note 20].
See Chapter 16, Part 2 for further guidance on requisitioned meetings.
40.196 Right to request a first meeting to appoint a trustee
Where the official receiver has not yet summoned, or has decided not to summon a meeting to appoint a trustee, any creditor may request the official receiver to hold such a meeting for that purpose [note 21].
If the request is made with the concurrence of not less than one-quarter, in value, of the creditors, it is the duty of the official receiver to call such a meeting [note 22].
See Chapter 16, Part 2 for further guidance on requisitioned meetings.
40.197 Right to request a general meeting
A general meeting to ascertain the wishes of the creditors in relation to any matter regarding the liquidation or bankruptcy can be requested, in writing, by creditors or contributories for not less than one-tenth in value of the company’s or bankrupt’s total debts [note 23] [note 24] (see paragraphs 16.19 to16.24).
40.198 Liquidation committee or creditors’ committee
At a meeting of creditors summoned for the purpose of appointing a person to be liquidator or trustee, a committee may be established, by the creditors, to exercise the functions conferred on it by the Act [note 25] [note 26]. These functions are to ensure that the actions of the liquidator or trustee are not beyond his/her powers and that he/she carries out relevant functions in accordance with the provisions of the Act [note 27] [note 28] [note 29].
The committee consists of at least three, and not more than five, creditors or their appointed representatives [note 30] [note 31]. In a winding up, the committee is called a ‘liquidation committee’ [note 32] and in a bankruptcy it is called the creditors’ committee [note 33].
40.199 Liquidation committee established by contributories
Where a meeting of creditors does not establish a liquidation committee (see paragraph 40.198), the meeting of contributories may appoint one of their number to make application to court that a further meeting of creditors be summoned for the purpose of establishing a liquidation committee [note 34] [note 35].
If a creditors’ meeting is so summoned, and it does not establish a liquidation committee, a meeting of contributories may establish its own liquidation committee which must consist of at least three, and no more than five contributories so elected [note 36] [note 37].
40.200 Right to request a public examination
A public examination may be requested by creditors whose claims comprise at least half the total value of known claims (which includes the claims of secured creditors without regard to the value of their security) [note 38] or [note 39].
Similarly, a public examination may be requested by three-quarters, in value, of a company’s contributories [note 40].
Guidance on this is provided in Chapter 14, Part 3.
40.201 Right to receive a notice of the official receiver’s intention to apply for release as liquidator or trustee
A creditor has the right to receive a notice of the official receiver’s intention to apply for his/her release as liquidator/trustee and may, following receipt, object to the release within 21 days of the date of the notice.
Guidance on this is provided in Chapter 37, paragraph 37.12.
40.202 Right to apply to court in respect of acts of the liquidator
A creditor or contributory aggrieved by an act or decision of the liquidator may apply to the court, and the court may confirm, reverse or modify the act or decision complained of, and make such order as it thinks just [note 41] [note 42].
In practice, the court will only interfere with a decision of a liquidator if it was taken in bad faith or if it was so perverse as to demonstrate that no liquidator properly advised could have taken it [note 43] [note 44].
40.203 Right to apply to court in respect of acts of the trustee
A creditor dissatisfied by any act, omission or decision of a trustee of the bankrupt’s estate may apply to the court; and on such an application the court may confirm, reverse or modify any act or decision of the trustee, may give him/her directions or make such order as it thinks just [note 45].
For such an application to succeed, it will be necessary for the creditor to show that trustee was acting in a manner in which no reasonable trustee would act [note 46].
40.204 Right to object to decision on proof
A creditor, if dissatisfied with the liquidator or trustee’s decision with respect to his/her proof, may make application to the court for the decision to be reversed or varied [note 47] [note 48]. Any application under these rules must be made within 21 days of the creditor receiving the liquidator or trustee’s written statement of his reasons for rejecting the proof.
Any other creditor, if dissatisfied with the liquidator or trustee’s decision in admitting or rejecting the whole or any part of a proof, may also apply to the court [note 49] [note 50]. Any application under theses rules must be made within 21 days of the creditor becoming aware of the liquidator or trustee’s decision.
[Back to Part 8 – Debts not released on discharge (bankruptcy only)]