Protocol standard term 17.1 says: “The supervisor may allow for dividend purposes claims submitted by creditors as at the effective date. If any creditor does not make any claim in writing within 4 months after the effective date, then that creditor may not participate in any dividend payment, subject to paragraph 17.3 below”.
17.3 says: “Any creditor who makes a late claim will be entitled to participate (subject to the supervisor accepting that the creditor has a reasonable explanation as to why any delay occurred) and to receive their full share of dividends notwithstanding the fact that some distributions may have been made prior to the submission of the claim”.
We occasionally get asked how this should work in practice, or how other IPs approach these terms. As you’d expect, we see quite a wide spread: from those who enforce the terms strictly after just notifying the creditors in the initial meeting pack and disallow all claims received after the deadline; to those who don’t really enforce the deadline and continue to ask for claims some time after they could have excluded the creditor. The first approach is likely to create difficulties in your relations with the creditors, whilst the latter might end up prejudicing the debtor, particularly if the arrangement provides for a minimum dividend. As you’d expect, we think that the correct approach should be somewhere between the two extremes.
We recommend making the 4 month cut-off clear in the covering letter sent to creditors with the chairman’s report on the outcome of the meeting to approve the arrangement. We then suggest sending a reminder to anyone who has not claimed, say approximately a month before the deadline. Finally, we recommend sending a letter to anyone that you intend to exclude as soon as the deadline expires. If you have been through all of these steps and have evidence that you have taken all reasonable steps to get the creditor to claim, they are unlikely to be able to argue later that they had “a reasonable explanation for why any delay occurred”.
One of the more difficult areas is where a voting agent has only recently been instructed to deal with an old debt, or where an old debt has recently been purchased and the agent or new owner wants to claim out of time. Harsh though it may seem, if the original claim was properly pursued and no proof of debt was received, we don’t think that the fact that they subsequently bought the debt should change your original decision to exclude the debt.
What you are prepared to accept as reasonable varies from IP to IP, but you should be in a much stronger position if you have given the creditors every opportunity to claim within the time limit.
