Empty Rhetoric and Empty Promises: The Creditors' Meeting

This article focuses on creditors' meetings in insolvent liquidation. A creditors' meeting is, as its name suggests, a meeting of a company's creditors at which a liquidator is appointed to realize and distribute what assets of the company remain amongst its creditors. In 1992-93 there were 36,369 company liquidations compared with 5,104 company insolvencies which used other available insolvency procedures.' The statutory description of a creditors' meeting contained in the Insolvency Act 1986 and the supporting secondary legislation is literally that a creditors' meeting should be held,2 that creditors should be given the opportunity to attend and vote for a liquidator of their choice,3 and finally that the directors of the insolvent company present to the meeting a statement of the company's affairs disclosing such information as the insolvency legislation requires, in addition to delegating one of their number to attend the meeting.4 The textbook accounts' of the creditors' meeting do not enlighten us any further as to what actually takes place at the meeting. From this standpoint the inescapable conclusion is that creditors' meetings are simply a minor bureaucratic process in a plethora of rules6 dealing with insolvent companies. Yet the creditors meeting is a potentially very important event: creditors generally, from unsecured trade creditors ranking at the bottom of the distribution list to preferential creditors such as employees7 and government departments, might expect to see some recognition of their status as the group primarily affected by the insolvency; the directors or the director nominated to attend the meeting has to face creditors who have lost money in a business venture managed by him; and for insolvency practitioners it is an important source of business. This is a procedure which occurs in an overwhelming majority of insolvent companies but it is one about which we know very little.