The Creditor Decision Deposit Is The Funding Required When Creditors Requisitioned A Decision In An Insolvency Procedure

What Is The Creditor Decision Deposit? Well, there are few instances in which creditors would need to requisition a Decision of an insolvent estate. The most likely instance would be if creditors wish to change the Insolvency Practitioner.

If the Insolvency Practitioner will not let another practitioner take over at the informal request of a creditor (and they would be under no obligation to do so), then a solution can either be a Court application for their removal if there was good reason for that approach or alternatively more commonly the creditor will formally requisition a Decision.

SUMMARY OF KEY FACTS

  • A creditor can requisition a Decision in an insolvency case if they have the support of 25% or more of creditors by value; AND
  • IF upon being notified the creditor is provided within 14 days with a breakdown of a request for a deposit from the Insolvency Practitioner, then they must pay it for the Decision to be held; BUT
  • IF no deposit is sought within the 14 days then the Insolvency Practitioner must convene the Decision without it.

What Is The Creditor Requisition Decision?

The Creditor Requisition Decision is the procedure that enables the creditor of an insolvent estate such as a Liquidation, Administration or Bankruptcy to compel the Insolvency Practitioner to hold a Decision Procedure.

The creditor’s right to requisition a Decision arises from Rule 15.18 of the Insolvency (England And Wales) Rules 2016.

Rule 15.18 of the Insolvency (England And Wales) Rules 2016

15.18(1) In this Chapter, “requisitioned decision” means a decision on nominations requested to be sought under section 136(5)(c) or a decision requested to be sought under section 168(2)(1), 171(2)(b), 171(3A)(2), 172(3), 298(4)(c)(3) or 314(7)(4) or paragraph 52(2) or 56(1) of Schedule B1(5).

(2) A request for a decision to be sought under paragraph 52(2) of Schedule B1 must be delivered within 8 business days of the date on which the administrator’s statement of proposals is delivered.

(3) The request for a requisitioned decision must include a statement of the purpose of the proposed decision and either—

(a) a statement of the requesting creditor’s claim or contributory’s value, together with—
(i) a list of the creditors or contributories concurring with the request and of the amounts of their respective claims or values, and
(ii) confirmation of concurrence from each creditor or contributory concurring; or
(b) a statement of the requesting creditor’s debt or contributory’s value and that that alone is sufficient without the concurrence of other creditors or contributories.
(4) A decision procedure must be instigated under section 171(2)(b) for the removal of the liquidator, other than a liquidator appointed by the court under section 108, if 25% in value of the company’s creditors, excluding those who are connected with the company(6), request it.

(5) Where a decision procedure under section 171(2)(b), 171(3), 171(3A) or 298(4)(c) is to be instigated, or is proposed to be instigated, the court may, on the application of any creditor, give directions as to the decision procedure to be used and any other matter which appears to the court to require regulation or control.

(6) Where the official receiver receives a request under section 136(5)(c) and it appears that it is properly made, the official receiver must withdraw any notices previously given under section 136(5)(b) and act in accordance with Chapter 2 as if the official receiver had decided under section 136 to seek nominations.

Creditors Decision Requisition Form

In order to serve notice on the Insolvency Practitioner of their desire to requisition a Decision, the creditor will need to typically complete a Requisition of Decision Form.

If all the requirements of Rule 15.18 are met, it is possible for a creditor to serve such notices without the use of a form.

Creditors Decision Deposit Requirements

The requirements of the Creditors Decision Deposit are that if a Liquidator or Administrator or Trustee in Bankruptcy receives notice under Rule 15.18 of the Insolvency (England And Wales) Rules 2016 from a creditor who wishes to do the following:

  1. Remove A Liquidator; OR
  2. Remove An Administrator; OR
  3. Remove A Trustee In Bankruptcy

then the Insolvency Practitioner who is the Liquidator or Administrator or Trustee in Bankruptcy must hold a Decision IF the creditor meets all of the requirements in Rules 15.18 and also Rule 15.19.

One of the key requirements is the right for the Insolvency Practitioner to request and require that the creditor seeking the Decision pays a deposit as security for the costs of the process in light of Rule 15.19 of the Insolvency (England And Wales) Rules 2016.

A request for the Creditors Decision Deposit must be made by the Insolvency Practitioner within 14 days of being properly notified of the requisition request by the creditor. If the Insolvency Practitioner fails to send a breakdown of a request for such a deposit within that 14 day period then the Decision procedure must be held regardless.

Rule 15.19 of the Insolvency (England And Wales) Rules 2016

15.19(1) The convener must, not later than 14 days from receipt of a request for a requisitioned decision, provide the requesting creditor with itemised details of the sum to be deposited as security for payment of the expenses of such procedure.

(2) The convener is not obliged to initiate the decision procedure or deemed consent procedure (where applicable) until either—

(a) the convener has received the required sum; or
(b) the period of 14 days has expired without the convener having informed the requesting creditor or contributory of the sum required to be deposited as security.
(3) A requisitioned decision must be made—

(a) where requested under section 136(5)(c), within three months; or
(b) in any other case, within 28 days;
of the date on which the earlier of the events specified in paragraph (2) of this rule occurs.

(4) The expenses of a requisitioned decision must be paid out of the deposit (if any) unless

(a) the creditors decide that they are to be payable as an expense of the administration, winding up or bankruptcy, as the case may be; and
(b) in the case of a decision of contributories, the creditors are first paid in full, with interest.
(5) The notice of a requisitioned decision of creditors must contain a statement that the creditors may make a decision as in paragraph (4)(a) of this rule.

(6) Where the creditors do not so decide, the expenses must be paid by the requesting creditor or contributory to the extent that the deposit (if any) is not sufficient.

(7) To the extent that the deposit (if any) is not required for payment of the expenses, it must be repaid to the requesting creditor or contributory.

How Much Is the Creditors Decision Deposit?

The amount of the Creditors Decision Deposit is not a figure set in stone.

The figure is one that will be requested by the Insolvency Practitioner and can vary, depending for example only on:

  • The volume of creditors.
  • The potential disputes that might arise over the amount that each creditor is entitled to vote for.
  • If the Decision is held by correspondence or by a remote virtual meeting or as a physical meeting.
  • How many creditors attend any such meeting.
  • If any meeting has to be adjourned for any reason.
  • Legal issues that might arise as a result of the Decision procedure requisitioned by the creditor(s).

Our CEO, Elliot Green who is a Licensed Insolvency Practitioner, has experienced requests for deposits from other Practitioners ranging from £0 to £7,500.

Can You Challenge The Amount Of The Deposit?

Yes, you can challenge the amount of the deposit by a detailed review of the itemised breakdown to see if there are any estimated costs and expenses that might be capable of being reduced.

With such an approach you may be able to negotiate a reduction in the level of the deposit.

Will You Get The Deposit Back?

If there are sufficient asset realisations either now or in the future then you can seek a Decision of creditors for the costs of the requisitioned Decision to be paid out of the assets of the insolvency. In such an instance you may have the entire deposit returned to you.

If the actual costs of the Decision process are less than the Insolvency Practitioner’s breakdown provided, then any surplus should be refunded to the creditor.

Is The Creditor Decision Deposit Fees Of The Insolvency Practitioner?

No, the Creditor Decision Deposit is not fees of the Insolvency Practitioner. It is a DEPOSIT ie. security for the cost and expense of the Decision procedure.

Creditor Deposit - fee or deposit?

Even if an Insolvency Practitioner has already obtained approval from creditors to draw fees by way of a valid fee resolution, that is a separate matter from the Creditor Decision Deposit. The Creditor Decision Deposit is NOT an asset of the insolvency process; it is the money of the creditor who has requisitioned the decision.

The Insolvency Practitioner, therefore, cannot rely upon the right to draw fees from the insolvent estate under a historic fee resolution to assume entitlement to any or all of the Creditor Decision Deposit.

The entitlement to offset the costs of the requisitioned Decision procedure from the Creditor Decision Deposit can be resolved either by agreement between the Insolvency Practitioner and the creditor or if necessary by reference to Court. In view of the sums involved, it would be normal for such matters to be resolved by way of agreement.

Do You Need To Pay The Deposit If You Have A Complaint About The Insolvency Practitioner?

Yes, you will still need to pay the deposit to have the requisitioned Decision procedure held if a deposit has been requested within the 14 day period, even if you have a complaint about the Insolvency Practitioner.

What About A Complaint About Negligence Or Defective Work?

Yes, you will still need to pay the deposit to have the requisitioned Decision procedure held even if you have a complaint about the Insolvency Practitioner in relation to matters of alleged negligence or defective work.

The Decision procedure rules are set out in the legislation and they are unaffected by complaints.

If you have a complaint about an Insolvency Practitioner then there is a separate process operated by the Insolvency Service called Complain About An Insolvency Practitioner. You should however first complain to the Insolvency Practitioner’s firm in the first instance and go through their complaints process.

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