Posted on 4 December 2014
25 years after the invention of the World Wide Web, it is fair to say that the internet has completely transformed almost every aspect of private, public and work life for many of us. Online shopping, internet banking and virtual meetings are just some of the useful facilities available to us from the comfort of our own homes but will the internet stop us meeting one another in real life any time soon?
Well… that’s exactly what the latest changes to the Small Business, Enterprise and Employment Bill is trying to encourage.
The Bill proposes that physical creditor meetings can only be held if requested by 10% of creditors in an insolvency, which in some cases would represent hundreds of different businesses or individuals. A Labour recent amendment during the Bill’s committee stage which proposed that a physical meeting could be held if just one creditor requested a meeting was passed after Government MPs missed the vote, but has now been reversed.
These new measures have been put into place to encourage more virtual creditor meetings to take place over the Internet however, with over 42% of SME internet users experiencing issues due to poor connectivity, service reliability and poor internet speeds – is this an impractical option?
With 2014 marking the 25th anniversary of the WWW, the Government is taking steps to invest in world class internet access for everyone. However, recent research by the Federation of Small Businesses (FSB) found that 45,000 small businesses across the UK had no broadband access, with connections unreliable for thousands more.
So what does this mean for insolvency procedures?
Whilst the Government is supposed to be boosting creditor engagement in insolvencies, these measures could have the opposite effect. The move away from physical creditor meetings is a real concern for businesses and individuals in areas such as Shropshire and Mid Wales, who in particular are still awaiting faster fibre broadband coverage.
Physical creditor meetings are a key way of engaging creditors in insolvencies, and there is very little justification for removing an insolvency practitioner’s power to call a physical meeting.
Creditor engagement helps increase returns to creditors, keeps insolvency costs down, and makes sure misbehaviour by failed companies’ directors is brought to light. Alternatives, such as a virtual meeting, simply would not be as effective in doing this.
Even though this amendment has now been overturned, it’s not too late for the Government to reconsider its proposals. In short, the Government needs to listen to those with first-hand insolvency experience, and reconsider the amendment taking into account the creditors’ best interests.