Virtual meetings could save creditors’ cash and IPs bruises

PwC's Tony Lomas still sees future for face-to-face with creditors

Insolvency practitioners most fear having to take the brunt of creditors’ ire when handling administrations.

Meeting in the flesh has seen some IPs suffer verbal, and even physical, batterings from angry creditors.

But this could now be a thing of the past, as changes to the insolvency rules mean administrators may never have to come face-to-face with creditors in the future.

Alterations to the rules, expected to take effect on 6 April, will sanction remote attendance at creditor meetings, with administrators able to use conference calling and internet-based alternatives, such as webcasting.

The ramifications of the new rules go beyond saving on sticking plasters, with experts suggesting that the cost of setting up a virtual creditors meeting will be much less than a real world encounter.

However, it’s not the end of the face-to-face meeting, as influential creditors, whom the administrators work in the interest of, may insist on the old-fashioned alternative.

Neil Smyth, partner in reconstruction and corporate recovery at law firm Taylor Wessing, said: “One of the biggest issues for creditors is, yes they could save money, but do they want to see the whites of people’s eyes?”

Tony Lomas, chairman of business recovery and partner at PwC, agrees, adding: “Where the creditors lose significant sums of money they appreciate meeting the insolvency practitioner so they have the opportunity to ask questions.”

Some in the profession have called the changes unworkable and impractical, and potentially open to fraud.

“How are we (insolvency practitioners) going to ensure that all creditors have access?” said Louise Brittain, partner in reorganisation services at Deloitte. “It could increase fraud as you don’t meet people. We have to be careful it doesn’t get abused.”

Smyth adds: “There are millions of people tuned into email and the internet but a lot who are not. How does the IP work out who does and who doesn’t?”

The upside to the changes is that the Insolvency Service estimates there could be annual savings of £42m for the parties involved in an
insolvency.

An Insolvency Service spokesman said: “The whole thrust behind this is to make it simpler for everyone, creditors, administrators, etc, and to make it cheaper and cut down the cost so that more can go to the creditor.”

Instead of replacing face-to-face meetings wholesale, professionals expect virtual meetings to be used as an optional extra, such as for creditors based abroad.

“It could work as an add-on rather than an instead-of,” said Brittain.
“The provision is certainly going to be used tactically,” added Smyth.
in our view
It is great to see the Insolvency Service react to concerns that the Insolvency Act is outdated and is now taking into consideration recent technological advances such as conference calling and the internet.

However, at a time when corporate administrations are set to increase, the lack of personal interactivity could concern irate creditors.

Further reading:

Online insolvency register could save time and money