We
are seeing more attempts to take appointments off the floor at S98 meetings. We
are already aware of the glitch in the legislation that requires the outgoing
members’ liquidator to produce a progress report for his brief tenure, but the
voting at the meeting can have its problems, as we saw recently.
A
client recently approached us about a proxy they had received for a section 98
meeting. The proxyholder was an IP at
another practice, but it contained no voting instructions, such that it was a
general proxy. The proxyholder duly
attended the meeting and attempted to use the proxy to vote for another IP in
their practice to take the appointment.
However, as you are aware, rule 8.6(1) states that “a proxyholder
shall not vote in favour of any resolution which would “directly or indirectly”
place him, or any associate of his, in a position to receive any remuneration
out of the insolvent estate, unless the proxy specifically directs him to vote
in that way”. The proxyholder had argued
to our client that since the meeting was only considering a resolution to
appoint a liquidator and not a fee resolution then the proxy could be validly
used.
The
problem with that argument is where rule 8.6 uses the words “directly or
indirectly”. Using the proxy to pass a resolution
to appoint an IP in the practice as liquidator would indirectly put them in a
position to receive remuneration, since the expectation is that the liquidator
would be remunerated for acting as such.
Given
the increasing number of “contested” section 98 meetings we expect to see this
arise more often, but it led us to consider what you should do if that
happens. It is easier to see a solution
if the proxyholder represents overwhelming voting power and you are certain to
lose the appointment. If it is that
clear-cut, then we think that the safest solution would be to notify the
creditor as soon as you receive the proxy and point out that if they want the proxy
holder to vote for an IP from his firm, they need to specify that in the
relevant space on the proxy form. Even
if they fail to correct that proxy and the proxyholder is prevented from voting
for his own colleague, our view is that it is probably best to avoid a
subsequent challenge or request for your removal and instead use other
attendees, or the chairman’s own general proxies to achieve the same outcome.
Unfortunately,
most cases are not so straightforward and the chairman may simply have to
disallow the proxy and take the vote, or adjourn the meeting to allow the
creditor to submit a revised proxy and then conduct the full vote on another
day. Closing the meeting without
addressing the matter will only lead to complications and unnecessary cost.
