Anyone who has had dealings with bankruptcy estates over the past few years would have come across a virtual meeting being called to get a resolution approved. Virtual meetings have been a part of the Bankruptcy Act since May 2003.
If we were asked for our opinion of these provisions and whether we thought that they were beneficial and useful in the conduct of estates, our response would be a resounding Yes. The operative part of section 64ZBA is very short:
(1) The trustee may at any time put a proposal to the creditors by giving a notice under this section.
(2) The notice must:
(a) contain a single proposal; and
(b) include a statement of the reasons for the proposal and the likely impact it will have on creditors (if it is passed); and
(c) be given to each creditor who would be entitled under section 64A to receive notice of a meeting of creditors; and
(d) invite the creditor to either:
(i) vote Yes or No on the proposal; or
(ii) object to the proposal being resolved without a meeting of creditors; and
(e) specify a time by which replies must be received by the trustee (in order to be taken into account).
(3) If, within the time specified in the notice:
(a) at least 1 creditor votes in writing; and
(b) no other creditor objects in writing to the proposal being resolved without a meeting of creditors; then the following provisions have effect:
(c) if the proposal requires a special resolution and there is a Yes vote by a majority in number, and at least 75% in value, of those who voted within the required time–the proposal is taken to have been passed by a special resolution of creditors at a meeting;
(d) if the proposal does not require a special resolution and there is a Yes vote by a majority in value of those who voted within the required time–the proposal is taken to have been passed by a resolution of creditors at a meeting;
(e) in any other case–the proposal is taken not to have been passed.
The provisions allow normal and special resolutions to be put to creditors without the need for a physical meeting. It allows creditors time to consider a proposal and, should they wish to be involved in the voting process, the opportunity to vote without the need of disrupting a part of their day (or their proxy’s day) to attend a meeting that may only last a few minutes and will probably only consider this one resolution. Creditors know that the vote will be taken without any other business being raised or the resolution being altered at the last minute.
It also allows creditors to object to the vote being conducted through a virtual meeting, where they believe that further information or discussion should be had before the resolution is considered.
The practical benefits to creditors do not end there. The greater majority of the resolutions passed in an estate relate to fee approval. Our experience is that these resolutions are now put to creditors more often due to the fact that can be done so cheaply and easily. We are finding that we (the trustees at Worrells) are generally seeking fee approvals more regularly for smaller amounts throughout the administration instead of once a year or less for larger amounts and after all of the work has been done. More regular meetings – and the advices that are released to call with them – means that creditors are better informed more regularly. They also have the opportunity to say ‘Enough’ if fees are getting out of control. This gives some control back to creditors.
It also allows us to move further into our 21st century approach – and provides us with another opportunity to mention our website. We have set up a function that will allow creditors to cast their vote on virtual meetings called under the Bankruptcy Act straight from the estate’s File Information page on our website. That facility will be available whilst the meeting is current (until the time for voting has passed) and will deliver a PDF version of the voting slip to the staff members working on the estate and to the creditor for their files. It is very similar in function to our ‘I want to lodge a Proof of Debt’ function. ITSA has reviewed this function and has not raised any concerns with its working.
But the heading of this article is ‘Virtual Meetings in Corporate Administrations?’. One of the proposed corporate insolvency law reforms currently under discussion is the introduction of voting on certain proposals without the needs for a physical creditors’ meeting. Essentially virtual meetings are being considered for the Corporations Act. Many meetings on corporate files – like their personal insolvency cousins – are solely for fee approval. Now that voting on fee approval proposals can be done by a special proxy in the Chairman’s name, the introduction of these provisions would probably just formalise what is current practice anyway.
Is this a good idea? Yes, for all of the reasons set out above. More information more regularly, and more say over items like fees in the hands of the creditors can only benefit the system as a whole, and certainly make the practitioner’s life easier. We would encourage this approach for the benefit of all parties.