What happens next
As a creditor of the insolvent entity you should be circulated with all correspondence with creditors. You should therefore receive update reports, notices of meetings and other documentation.
For more details specific to the relevant procedure see the section on Insolvency Procedures. Below are outlined some of the most likely steps.
Initial meeting of creditors
For certain procedures a meeting of creditors may be arranged. A notice of the meeting will be circulated to all creditors together with a proof of debt form and a proxy form.
These meetings are usually a formality and often no creditors attend in person. However provided the employee is owed money they may attend the meeting and vote should any resolutions be proposed.
If a claim for payment from the Redundancy Payment Service (“RPS”) has been made the proof of debt form should be completed with details of any amounts that will not be paid the RPS. Completing a Proof of debt form
A proof of debt form only has to be completed once. Supporting documentation does not need to be provided, unless requested by the Insolvency Practitioner.
If the employee wishes to attend the meeting the proof of debt form should be returned to the Insolvency Practitioner. It is often helpful if the employee informs the Insolvency Practitioner that they intend to attend the meeting.
The proxy form does not need to be completed if attending in person. If the employee wishes another party to attend in their place then the proxy form should be completed with that party’s name as ‘proxy holder’. The proxy must be signed by the employee for it to be valid.
If the employee does not wish to attend but wishes to vote, the proxy form should be completed. It is usual for the Chairman to be nominated to vote on the creditor’s behalf and therefore “Chairman” should be entered as the proxy holder. The remaining parts of the proxy form should be completed with instructions as to how the Chairman should vote.
A meeting of creditors may give creditors the opportunity to form a creditors’ committee. This is a small group of between 3 and 5 members and the group have certain functions depending upon the type of recovery procedure. Employees who are owed money may apply to be on such a committee.
Initial and update reports
Depending upon the process an initial report and subsequent 6 monthly or annual updates may be sent to creditors, including employees to give them details as to how the matter is progressing.
These reports will give an indication as to whether a dividend is likely to preferential and to unsecured, non-preferential creditors. Preferential claims must be paid before non-preferential claims and certain claims from banks. HM Revenue and Customs (Inland Revenue and Customs and Excise) are no longer preferential creditors for insolvencies after 15 September 2003.
Employees’ claims may be preferential, non-preferential or part preferential and part non-preferential.
Preferential claims include;
Arrears of wages up to £800. If arrears have been claimed from the Redundancy Payment Service then they will form part of this £800;and
Holiday pay.
Non-preferential claims are claims that are not preferential as above.
The Entitlement calculator will provide an indication of the respective preferential and non-preferential claims – complete the form click 'calculate' and then click on 'full details'.
Dividends
Should there be funds available after payment of costs, the practitioner may seek to pay a dividend to creditors. If a dividend is to be paid the Insolvency Practitioner will normally provide employees with a calculation of their preferential and/or non-preferential claim. This should be checked by the employee for accuracy and the instructions followed. If the calculation appears incorrect evidence should be sent to support the claim (e.g. copy payslips).
It should be noted that in many cases no dividend is payable to preferential and non-preferential creditors.
End of the process
Employees will normally be informed of the end of the process. Usually no action is required.
