What to do ahead of creditors' meeting

[vok]

Hi,

I know there's a thread in progress below about retrieving money from a company that's gone out of business but this is a slightly different situation so I thought it deserved a new thread.

Briefly, my situation is this. I'm an IT contractor who's been working in a financial company - Client Company - for the past number of months, placed there through an IT firm that provides short term technical resources - Agency Company.

Client Company is billed by Agency Company who pay me. Or, rather, don't pay me until I jump up and down on their heads.

I finished up in the contract a few weeks ago and was waiting for 2 months of long-promised back pay to come through from them, just before I sent them an invoice for a third month's just-completed work. Instead, my accountants inform me that they've received notice that the firm is going into voluntrary liqudation and that there's a creditors' meeting to be held next Wednesday.

At this point, you may be tempted to ask, why did I let myself get into a situation where I was left with 3 months back pay outstanding. I ask myself the same question, and the brutal truth is that I didn't see it coming. And I did not have as much energy or time or motivation to hassle my accountant to hassle them to pay me, as they had to stonewall and dissemble.

So, as an unsecured creditor, it looks like I'm at the end of the queue of others who will have to be paid before me - Revenue, Banks etc. There's a hugely slim chance that the directors just got bored of the business and this will not be as bad as I fear. But, my working assumption at this point is that I'm going to lose everything.

But I don't want this to be a worst case scenario. What can I do between now and the creditors' meeting to maximise the chances of getting paid what I'm owed?

What happens at these meetings? Should I attend with a solicitor? Or two Serbian heavies? Am I expected to sit there meek as a mouse while these guys tell me there's no money left in the pot to pay me? Or does the most aggressive guy who shouts the loudest walk away with all the spoils?

Or should I be taking an entirely different tack and approaching the Client Company and trying to find some way for them to pay me at least some of the money directly?

Losing money on an investment is tough. But losing money that you never expected to have to do without is particularly hard to take. Any help or insight would be greatly appreciated.

Cheers.

 

[Graham_07]

Hi,

But I don't want this to be a worst case scenario. What can I do between now and the creditors' meeting to maximise the chances of getting paid what I'm owed?

You cannot change your standing between now and the meeting. If you are unsecured now, you will be unsecured then.

What happens at these meetings? Should I attend with a solicitor? Or two Serbian heavies? Am I expected to sit there meek as a mouse while these guys tell me there's no money left in the pot to pay me? Or does the most aggressive guy who shouts the loudest walk away with all the spoils?

A statement of affairs of the company is presented showing the assets/liabilities. The directors make a statement on the liquidation. A vote is cast on the appointment of the liquidator after which the directors have no further active function in the liquidation. You may attend. You may appoint a proxy to attend on your behalf. You may question ( as no doubt will others ) the management at the meeting on the reasons for the liquidation, the management of the company etc. The guy who shouts loudest will do no better than you unless (a) he/she is secured ahead of you and (b) there are sufficient funds to meet the demands of such secured creditors.

Or should I be taking an entirely different tack and approaching the Client Company and trying to find some way for them to pay me at least some of the money directly?

It would be illegal for the soon to be liquidated company to pay a creditor above another like this. It's called "fraudulent preference". Even if they wanted to ( which they may not or cannot ) , they are not supposed to. Regarding the client company, their contract was with the soon to be liquidated company. I imagine that they will most likely stick to that. After all, remember they have possibly already paid the soon to be liquidated company and may still owe that company money which they will be paying to the liquidator. it is not very likely that they will pay again.

Losing money on an investment is tough. But losing money that you never expected to have to do without is particularly hard to take. Any help or insight would be greatly appreciated.

I sympathise with your situation. I have attended many creditors meetings for clients of mine who were creditors of failed companies. If the balance sheet shows excesses of liabilities over assets, then after secured and preferential creditors ( Revenue, Staff wages etc. ) then it is unlikely that you will see anything from this. The liquidator may, in due course, find reason , or not, for action by him/her against the directors for fraudulent or reckless trading and if so then they may face restriction or disqualification as directors. However while that may happen, it will not increase your chances of a positive outcome to you financially I'm afraid. All I can suggest is go to the meeting. You will not likely be the only one in this position.

 

[MOB]

"Or should I be taking an entirely different tack and approaching the Client Company and trying to find some way for them to pay me at least some of the money directly?..........
It would be illegal for the soon to be liquidated company to pay a creditor above another like this."

I am not so sure that this is correct in these circumstances. The client company is not, as I understand it, in liquidation, only the agency. If the client has not yet paid the agency, there may well be good business reasons why it might choose to pay the IT contractor directly. There are all sorts of legal issues about this, but it might be worth the OP's while finding out if the invoices have been paid by the client before doing anything further. If the invoices have not yet been paid, I would take detailed legal advice before going further.

 

[Brendan Burgess]

I am not sure that things are as bleak as they seem. You say that it is a voluntary liquidation. Here is what basis.ie says about voluntary liquidations.

Circumstances when a company may be wound up voluntarily.

This section outlines the circumstances as to when a company may be wound up voluntarily in accordance with section 251 of the Companies Act 1963.
For members to voluntarily wind up their company, a majority of the directors must make a statutory declaration that, having made a full enquiry into the affairs of the company, they are of the opinion that the company will be able to pay its debts in full within a period not exceeding 12 months from the commencement of the winding up. Within 28 days of the making of the declaration of solvency, the members must pass a special resolution to wind up and appoint a liquidator. The resolution to wind up must be advertised in Iris Oifigiúil within 14 days after the passing of the resolution.

So, at this stage, the directors are saying that they can pay their debts.

Brendan

 

[Graham_07]

Do they mean
(a) members voluntary (solvent) or
(b) creditors voluntary (insolvent) as I had assumed from the title of the thread and given the long standing difficulty the OP had in getting paid even before this.

 

[FredBloggs]

From the thread I would assume its Creditors Voluntary but op should be able to clarify by quoting exactly what's in the letter he received. If its a memebrs voluntary it will specifically say that and that all creditors are being paid in full.

MOB makes a very valid point. If the client comapny is not in liquidation Op should try and find out if payment has been made by them to the Agency. If it hasn't would be worthwhile engaging a solicitor to try and secure the money owed. One way or the other the clint may be disposed to making some payment to the Op to keep his goodwill for future possible work

 

[vok]

FredBloggs, there's actually no mention of whether it's Creditors or Members Voluntary. The only reference made is in the title - "Notice To Creditors of Meeting To Wind Up Company Voluntarily".

"Notice is hereby given pursuant to Section 266 of the Companies Act, 1963 that a meeting of the Creditors of the above-named company will be held at X on date Y for the purposes mentioned in Sections 267 and 268 of the Companies Act, 1963."

What I don't see is any reference to creditors being paid in full. I also don't know where or when the notice was posted in the papers; presumably this is where it would say whether it was Members Voluntary or Creditors Voluntary?

Included is a proxy form, which I thought I didn't even have to fill out, as I thought it was simply for the purposes of appointing a solicitor in your stead, but on closer inspection, I may have to name myself as a proxy. Any ideas?

Thanks for the advice so far. Particularly Graham_07 for the detailed sharing of his obvious expertise in the area. It isn't exactly what I wanted to hear but it at least confirms my current understanding of the situation.

One other question. Are all unsecured creditors treated equally? As in, I realise I can't be re-designated from unsecured to secured, but there's no chance of some other unsecured creditor getting paid in full and me not getting paid at all? We're all in the same boat and will get treated equally in some so-many-pence-in-the-pound division of whatever remains to be paid?

Also, to re-iterate, answers on the proxy form question would also be appreciated.

Thanks again, folks. The reality of how crappy this situation is will hit soon. But, for now, I'm trying to get as much done while I'm still calm and rational.

 

[Graham_07]

"Notice is hereby given pursuant to Section 266 of the Companies Act, 1963 that a meeting of the Creditors of the above-named company will be held at X on date Y for the purposes mentioned in Sections 267 and 268 of the Companies Act, 1963."

These sections of the Companies Acts relate to "Creditors Voluntary winding up". They apply to insolvent companies, so my original post largely stands.

Included is a proxy form, which I thought I didn't even have to fill out, as I thought it was simply for the purposes of appointing a solicitor in your stead, but on closer inspection, I may have to name myself as a proxy. Any ideas?

Just checking on this, if you intend to attend yourself I'm not that it needs to be returned, but am not 100%. The proxy is intended where one wants to be represented and vote but not attend oneself. The proxy form should state something like
" Where any person wishes to be represented and/or voteby proxy the form of Proxy must be sent to xxxxxxxxx ( a solicitor or accountant or the registered office ) to reach there before 4.00 p.m. on xxxx (date)"
However all genuine creditors should be admitted to the meeting on proof of identity and claim. Some good help here especially on questions one can ask at the meeting:-
[broken link removed]
Some creditors, not attending will return proxies in favour of the chairman of the meeting, either allowing them to vote as they see fit or directing them to vote a particular way. The company will be hoping for it's choice of liquidator to be upheld and votes count here if there is any objection to that appointment.

One other question. Are all unsecured creditors treated equally? As in, I realise I can't be re-designated from unsecured to secured, but there's no chance of some other unsecured creditor getting paid in full and me not getting paid at all? We're all in the same boat and will get treated equally in some so-many-pence-in-the-pound division of whatever remains to be paid?

All unsecured creditors stand equally, no unsecured creditor will get paid in full at the expense of another not being paid at all. Again, though, as unpalatable as it may seem, be prepared for at the best, a percentage of the debt to you being paid, and at worst, none at all.

Also check out
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and
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for more information

 

[FredBloggs]

You don't have to send in a proxy as the debt is in your name and not a company's name.
However, despite this, I would take five mins and fill one out and post it in.

What Graham_07 says is correct and all genuine creditors should be admitted to the meeting without problem. #no one running a meeting is going to have a row at the door with creditors. What ususally happens though is the votes for liquidator are scutinised and at that point people are ruled out (eg if they're there on behalf of a company but the proxy isn't filled in or is incorrectly filled in)

Unfortunately from experience you have no chance of seeing any money from the liquidation and the best you can hope for is a minisule payout in a few years time. Best to approach the Client Company. If I were you I'd put my energy into that

 

[vok]

And that's when grim reality set in...

Sounds like I have to send a proxy in so as the invoice is payable to my umbrella company. I'm a director so presumably have to identify myself in that capacity.

Don't think I'm going to get any help from the Client Company either due to the fraudulent preference risk for them outlined above.

Time to come up with that Million Dollar Idea. First, though, this bottle of whiskey looks very full of itself. Time to take it down a peg or two...

Thanks to everyone who's contributed so far. Appreciate the clarity at least.

 

[FredBloggs]

Vok,
When signing the proxy make sure you write "Duly Authorised Officer of the Company" under your signature.
Do the client company still require your services? If they do they could work something out with you.
One way or the other best to try and put it behind you as soon as possible. Not easy I know but I've seen people nearly foaming at the mouth in anger at creditors meetings but at the end of the day all they got was their frustration off their chests and nothing else.
FB

 

[quarterfloun]

Been there in the UK, there are many ways to skin a cat. I got the errant director eventually - I was nice as pie with him (he thought I was being nice not having a go at him), sniffed around his business and ran all the way to the revenue - couldn't have happened a nicer guy Maybe you could delve into your mans business / background and using your knowledge of how he operates find flanks on which he is exposed. Find out has he any assets, HPI his CAR (s), etc. Find out his next game....
It is not nice but serial liquidation was my guys game - buy companies, run up debts, liquidate - oh look nothing left......