In moving Amendment 61ZC, I shall also speak to Amendment 61ZD in my name and that of my noble friend Lord Mendelsohn. I have further information to share with those who follow my noble friend’s actions carefully. He is not in Gibraltar; Gibraltar is here and he is in a meeting not far away and hopes to join us later.
The Government’s aim in Clauses 119 and 120 is to increase creditor engagement by allowing the development of communications as technology improves. The clauses abolish the power of the officeholder to summon a physical creditor meeting in all types of insolvency procedures. Instead of these physical, face-to-face meetings, the insolvency practitioner will need to hold virtual meetings through other means, such as via the phone, over the internet or through written correspondence. The insolvency practitioner will be able to hold a physical creditor meeting only if it is requested by a required proportion of creditors—10% of the value of the creditors.
Our amendments would set a threshold for calling a physical meeting at 10% of the number as well as the value of the creditors. As this is a probing amendment, I am open to other suggestions. Indeed, the noble Lord, Lord Flight, has already suggested that a minimum of three could convene such a meeting. I understand that and would be interested to hear the Minister’s response to it. The amendments also seek to encourage the holding of meetings if there are no real cost savings. I cannot quite see the point of cutting creditors out if we are also trying to make sure that they have a part to play in the processes.
We fear that the net impact of the Government’s proposal will be that, rather than increasing creditor engagement, these clauses will reduce it. The Federation of Small Businesses believes that the proposal will be detrimental to small businesses and the BPF also has concerns. As we have touched on, creditor engagement is a core part of a strong, transparent, fair and trusted insolvency regime. By their very nature, insolvencies can be complicated and confusing for those who do not deal with them often. They can also be daunting and time-consuming for creditors.
We believe that creditors’ meetings are an essential part of creditor engagement, trust and confidence in the insolvency regime. At present, meetings are usually called at the very outset of an insolvency proceeding and periodically afterwards. The meetings achieve a number of important goals, including helping to establish who all the creditors are and what they are owed, updating creditors on the process and progress of the case and finding out more details around the financial affairs of the debtor. Creditors will often be able to provide details to the IP of which they would otherwise have been unaware. The first meeting in a creditors’ voluntary liquidation, under both individual and company voluntary arrangements, also gives creditors the opportunity to question the directors of the insolvent company or the debtor himself or herself. This first meeting is a useful opportunity for creditors to participate in the process and is the most appropriate and convenient forum for agreeing the basis of the IP’s fees and establishing a creditors’ committee, should that still be permitted.
The drawbacks of alternative styles of meeting are clear. For example, a report published a few months ago by the Federation of Small Businesses revealed that some 45,000 small businesses do not have broadband and that thousands of others have very slow broadband speeds. In rural communities particularly, access to broadband can be very limited; so networks of information will not exist to allow such meetings to be held in the new virtual reality. Other areas, particularly outside London, have particular difficulties and it is therefore important to bear in mind that while the new virtual reality is coming, it may not have reached us all and, therefore, the Bill is sometimes in advance of where people are now. We are worried that this approach will reduce creditor engagement and, as a result, the amount of money that ends up in creditors’ pockets will be reduced. We are also worried that part of the process will be complicated. Our Amendment 61ZC ensures that there would be a more workable threshold whereby physical meetings can be staged, if required. I beg to move.