Under section 49(a) of the Insolvency Act (Chapter 253), the order of adjudication fixes a date — between six and 30 days after the order — for the first meeting of creditors to elect a trustee.
Sections 50 to 52 — notice and conduct of the meeting
50. Notice of the first meeting shall be given (a) in the National Gazette; (b) in the prescribed newspapers or such newspapers as the Court directs; and (c) by affixing a copy in a conspicuous place in the Registry and the post office nearest to where the debtor carried on business or resided at the date of the petition.
51. The meeting shall be held at the Registry or some convenient place near it, in the prescribed manner, and presided over by the Registrar — or, if he cannot attend through illness or unavoidable cause, by a chairman the meeting elects.
52. Subject to the Court’s directions, the chairman may adjourn the meeting from time to time and from place to place.
Note that the notice is public, not individual. There is no requirement to write to each creditor — a contrast with the company scheme, where a liquidator must give written notice to every known creditor under section 293(2).
Section 53 — who may vote, and for how much
(a) A person is not entitled to vote unless at or before the meeting he has proved a debt due to him under the insolvency;
(b) a creditor shall not vote in respect of any unliquidated or contingent debt, or any debt the value of which is not ascertained;
(c) a secured creditor is deemed a creditor only in respect of the balance due after deducting the value of his security — unless at or before the meeting he gives up the security to the trustee, in which case he ranks for the whole sum;
(d) votes may be given personally or by proxy;
(e) a resolution other than a special or extraordinary resolution is decided by a majority in value of the creditors present personally or by proxy and voting.
A creditor wishing to vote must first make preliminary proof that a provable debt is due. That may be done by affidavit in the prescribed form before the Registrar, or any Provincial Commissioner, Commissioner for Affidavits or justice, who may administer oaths for the purpose and, if required, shall deliver a certificate in Form 5.
The certificate is filed in the Registry and entitles the creditor to vote in respect of a debt of the amount stated. Full proof of debt for dividend purposes comes later, under sections 110 to 118.
Note the contrast with a company liquidation: here, value alone decides an ordinary resolution, whereas the definitions in section 1 require a majority in number and 75% in value for a special resolution.
Section 54 — electing the trustee and the committee
(a) appoint a fit person resident in the country, whether a creditor or not, to be the trustee of the property of the insolvent, at such remuneration (if any) as the creditors from time to time determine — or leave his appointment to the committee of inspection;
(b) appoint some other fit person or persons, not exceeding five, being creditors qualified to vote at the first meeting or persons authorised in the prescribed form by such creditors, to form a committee of inspection for the purpose of superintending the administration by the trustee;
(c) give directions as to the manner in which the property is to be administered.
The meeting may appoint more than one trustee — and must then declare whether any act is to be done by all or by any one or more of them — and may appoint persons to act in succession if those first named decline. Where more than one is appointed, they are joint tenants of the property of the insolvent.
Where a trustee is appointed, the meeting shall declare (a) the security (if any) to be given and (b) to whom, before the trustee enters office.
The trustee need not be a creditor — any fit person resident in the country. But there is no list of statutory disqualifications comparable to section 328 of the Companies Act. The safeguards here are the creditors’ own choice, the security required under subsection (4), the committee of inspection, and the continuing supervision of the official trustee under sections 10 and 11.
Remuneration is fixed by the creditors, from time to time — not by a statutory scale as under section 325 of the Companies Act for a Court-appointed liquidator.
Section 54(1)(c) is worth using: creditors may direct how the property is to be administered, and under section 65 the trustee must comply with the directions of the first meeting.
Section 57 — the certificate of appointment
(1) The appointment shall be reported to the Court, and on being satisfied that the requisite security has been entered into, the Court shall give a certificate declaring him to be trustee.
(2) The certificate is conclusive evidence of the appointment.
(3) The appointment dates from the date of the certificate.
(4) Where the official trustee holds office, or the trustee is changed, a certificate may likewise be made and is conclusive evidence.
(5) For all purposes of any law requiring registration, enrolment or recording of transfers of property, the certificate (a) shall be deemed to be a transfer of property and (b) may be registered, enrolled and recorded accordingly.
Subsection (5) is the practical key to dealing with registered land and other registered assets: the certificate is presented as if it were a transfer, and the trustee is recorded as proprietor.
Sections 58 to 61 — gaps, vacancies and defects
58. If during an insolvency there is no trustee acting, the official trustee shall act as the trustee.
59. If there is no committee of inspection, anything authorised or required to be done or given by a committee may be done or given by the Court on the trustee’s application.
60. Where the committee has fewer than five members, the creditors may increase the number to not more than five.
61. A defect or irregularity in the election of a trustee or committee member does not invalidate any act bona fide done by him, and no act of the trustee or the creditors is invalid by reason of a failure to elect all or any members of the committee.
Where the proof of a creditor without whose vote the trustee would not have been elected is later expunged or reduced, the Court may, on the application of a majority in value of the creditors who have proved, order a fresh meeting to elect a new trustee (s 55). The meeting is summoned and held as near as possible in the manner of the first meeting.
And under section 56, on sufficient cause being shown, the Court may simply order a meeting for the election of a new trustee at such time, place and manner as it thinks proper. Section 61 then ensures that acts already done in good faith are not unravelled.
Sources
- Insolvency Act (Chapter 253) — ss 1, 9–11, 49–61, 65, 110–118
- Companies Act 1997 — ss 293, 325, 328
- Land Registration Act (Chapter 191)
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.