Can a Trustee in Bankruptcy call meetings of creditors?

Bankruptcy meetings can be called for a variety of reasons and they can be initiated by the Trustee in Bankruptcy or in certain circumstances by the creditors. Creditors holding twenty five percent (25%) of all claims can request the Trustee in Bankruptcy to call a meeting of creditors.The most common reason for a Trustee in Bankruptcy to call a meeting of creditors is to have their fees approved but there are reasons as follows:

  • To vote on an annulment proposal;
  • To appoint a committee of creditors;
  • To inform creditors in person about the administration of the estate;
  • To consider a change of Trustee in Bankruptcy to administer the case.


Who is allowed to vote & how are the votes counted?

The Bankruptcy Act has strict rules and regulations as to who is allowed to vote at meetings and how votes are to be counted. These rules are explained below.

Who can vote?

Only creditors who have proved their claim can vote at a meeting of creditors (Sec 64ZA of the Bankruptcy Act). A creditor must prove their claim by completing a Proof of Debt or by completing a Statement of Claim.When deciding if the creditor can vote, the Trustee in Bankruptcy will most likely ask the creditor to provide documentary evidence to support their claim. If the creditor refuses or fails to provide documentary evidence the Trustee in Bankruptcy may reject the claim for voting purposes. If this happens the vote won’t be counted.

Without completing a Proof of Debt or a Statement of Claim the creditor will not be able to vote at the meeting.

How are the votes usually counted?

Creditors are usually allowed to vote for the full face value of their debt, for example – if the face value of the debt is $100, then the creditor will be admitted to vote for $100 (Sec 64ZA(4).

Are the voting rules different for Assigned or Purchased Debts?

However, if the debt has been sold or assigned for less than its face value, then the creditor who has purchased the debt or has been assigned the debt will only be able to vote for the amount that they paid for the debt (Sec 64ZB(8) of the Bankruptcy Act). This rule is to prevent friends or family members of the bankrupt purchasing debts (for less than the face value) and then voting for the full face value of the debt. If the creditor who purchased the debt fails to disclose how much they paid for the debt, then that creditor is not entitled to vote(Sec64ZA(6) of the Bankruptcy Act).

How are resolutions at meetings decided?

Ordinary resolutions are usually passed if the creditors representing at least 50% of the total claims in value vote in favour. However some resolutions under the Bankruptcy Act require a Special Resolution (for example a special resolution is required to pass an annulment proposal). For a Special Resolution to be passed creditors voting in favour must represent at least 75% of the total claims (in value) and at least 50% of the creditors (in number of creditors).

If a meeting of creditors is called am I as a bankrupt obliged to attend?

If the Trustee in Bankruptcy calls a meeting of creditors and issues a notice to the bankrupt to attend under Section 77(1)(b)of the Bankruptcy Act, then the bankrupt is obliged to attend the meeting. If the bankrupt fails to attend then (without a good reason) then the Trustee could file an objection to discharge which could result in the bankruptcy being extended to 8 years (Section 149Dof the Bankruptcy Act).

Virtual meetings in Bankruptcy

A Trustee in Bankruptcy can in some circumstances have resolutions passed by issuing formal notices under the Bankruptcy Act (Sec 64ZBA). These notices are usually used by Trustees in Bankruptcy to save costs as hold physical meetings can be costly. The most common reason to issue a notice of this type is to have fees approved by creditors.




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