Rule change will allow insolvency practitioners to hold creditors' meetings online using conference calls or webcasting
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