The first meeting of creditors in an administration, although procedural, is still important. This was highlighted in the recent case of Bluechain Pty Ltd (No 2) [2021] VSC 260.
Facts
- The Court ordered that provisional liquidators be appointed to the company and then, a few months later by consent, that the provisional liquidators be appointed as administrators.
The purpose of the appointment of administrators was for the creditors to consider a Deed of Company Arrangement (DOCA).
- An alternative administrator was proposed by a shareholder.
- The first meeting of creditors was adjourned without a vote on the change of administrators. This was because the administrator formed the view that:
- the actions of creditors proposing an alternative administrator was inconsistent with the parties' views at the hearing appointing him as an administrator; and
- The proposal was an attempt to subvert the Court.
The Application
- A shareholder (of which the company was a wholly owned subsidiary) and was the party intending to propose the DOCA sought orders:
- that the current administrators be replaced with the administrator they proposed; or
- alternatively, the administrators be compelled to convene the first meeting of creditors and be restrained from further adjournment without leave of the Court.
- The director sought orders:
- that an orderly administration continue without further attempts to replace the administrators; or
- alternatively, the company be placed into liquidation.
- The administrators sought amongst other orders that no creditor may vote in respect of any proposal to change administrators.
The Court
The Court accepted that if the creditors were allowed to vote on the change of administrator that:
- the majority in number of creditors would be achieved for the removal of the administrator without relying on related parties to the company; however
- the majority in value of creditors' admitted claims to remove the administrator would depend on the votes of related parties to the company.
The Court ordered that the creditors should be given the opportunity to remove and replace the administrators at the first meeting of creditors if they wish to do so.
Lesson
The Court is very reluctant to step in and take away creditors' rights to vote in the usual manner at meetings of creditors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.
