Overview Of Creditor Rights To Information In A Liquidation
Creditor rights to seek out information in a Liquidation can be summed up as follows:
- Under the Insolvency Code of Ethics there is a duty of transparency owed to creditors.
- A creditor has legitimate in interest in the outcome of the Liquidation; they therefore have the right to ask questions about the Liquidation.
- Liquidator duties and in particular fiduciary duties extend to the unsecured creditors as a whole.
- Entitlement to details of a Liquidator’s investigations arise amongst other things by virtue of Statement Of Insolvency Practice Number 2.
There are statutory duties set out in the Insolvency Act 1986 in which information has to be reported to creditors by the Liquidator as well. This page however focuses on how creditors can potentially look to obtain information outside of formal reporting.
Creditor Rights To Information In A Liquidation From The Insolvency Code Of Ethics
An Insolvency Practitioner is a heavily regulated individual. The standards of conduct expected of such a person are very high.
The starting point in relation to creditor rights to information in a Liquidation is that even if creditors have no express rights to information that does not mean they should be denied provision simply because of that. It will depend on the facts of the case.
The Insolvency Code Of Ethics places transparency at the heart of how an Insolvency Practitioner should act in respect of their administration of an Insolvent Estate:
Both before and during an insolvency appointment an Insolvency Practitioner may acquire personal information that is not directly relevant to the insolvency or confidential commercial information relating to the affairs of third parties. The information may be such that others might expect that confidentiality would be maintained.
Nevertheless an Insolvency Practitioner in the role as office holder has a professional duty to report openly to those with an interest in the outcome of the insolvency. An Insolvency Practitioner should always report on his acts and dealings as fully as possible given the circumstances of the case, in a way that is transparent and understandable. An Insolvency Practitioner should bear in mind the expectations of others and what a reasonable and informed third party would consider appropriate.
The indication is overall that information should be shared with creditors rather than not. Confidential informaton, privileged information or information shared that might be prejudicial may have to be however refused. Creditors who make unreasonable demands for information can expect to have such requests rejected.
Creditor Rights Flowing From Statement of Insolvency Practice 2
Statement of Insolvency Practice 2 sets out the requirements for a Liquidator’s investigation duties.
As part of those duties they include the duty to report to creditors and again a suggested duty of transparency appears clear:
Creditors should be given information regarding investigations, any action being taken, and whether funding is being provided by third parties; disclosure would be subject to considerations of privilege and confidentiality and whether investigations and litigation might be compromised.
The times at which information is provided to creditors will vary from case to case, but as a minimum an office holder should:
a) include within the first progress report a statement dealing with the office holder’s initial assessment, whether any further investigations or action were considered, and the outcome; and
b) include within subsequent reports a statement dealing with investigations and actions concluded during the period, and those that are continuing.
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