The Insolvency Act - Help in times of financial trouble [Part 2]
Last week, this column focused on some of the preliminary steps to be taken by a person or entity applying for bankruptcy under the Insolvency Act, 2014 ('the Act'). This week, an effort will be made to outline the steps in the commencement of the proceedings under the Act.
For the effective administration of the process, Section 222 of the Act provides for the appointment of a supervisor of Insolvency ('the Supervisor') who shall regulate the licensing of trustees and supervise the administration of all estates, to include estates administered by the Government. Thus, the notice of intention, on the prescribed form, must be lodged with the supervisor.
In the case of a person facing imminent insolvency, the proceedings for proposal shall commence with a receiver or a debtor or, in the case of a bankrupt, the trustee of the bankrupt estate, lodging a copy of the proposal in writing. The proposal shall be made to creditors as a group, separated into classes, or to secured creditors. Any interested person, at any time after the notice of intention or the proposal is filed, may apply to the court to determine the class of secured claims and the class in which a claim falls. Any person affected adversely by any ruling of the court may appeal on the grounds that the determination made by the court is oppressive or unfairly prejudicial.
Once the proposal is in hand, the trustee has a duty, within 21 days, to convene a meeting of creditors to consider the proposal. The Supervisor and all known creditors must be advised on or before 10 days of the meeting. At the meeting, the creditors may discuss and agree on the supervision of the affairs of the debtor or any other aspect of the proposal. Creditors may accept or refuse the proposal or adjourn the meeting.
A trustee, upon receipt of a proposal, shall make an appraisal and investigate the affairs and property of the debtor so as to arrive at a reasonably accurate estimation of the financial status of the debtor and the cause of his financial difficulties or insolvency. Thereafter, the trustee is obliged to make a report at the meeting of the creditors. A trustee may also recommend that the debtor attend counselling.
Upon an application to the court, the court may direct the trustee to access the debtor's premises, books, records or any other financial documents in order to monitor the business and financial affairs of the debtor. After determining the state of the financial status of the debtor, the trustee shall file a report and deliver it to the Supervisor. A copy may be filed at the court, as the court may direct.
If the secured creditors should fail to file a proof of claim, they shall be deemed to have voted for the refusal of the proposal. However, any creditor with a proven claim may vote on the proposal by mail, personal delivery or printed electronic transmission. A creditor who is related to the debtor may vote against the proposal but not for the acceptance of the said proposal.
Next week, in the final column on this important area of the law, an attempt will be made to outline the acts of bankruptcy and some related matters.