Meeting of Creditors

Procedure preceding a meeting of creditors

The procedure used to call a meeting of creditors depends on whether the administration of the bankruptcy is summary or ordinary. A bankruptcy is said to be “summary” if the value of the debtor’s realizable assets is lower than $15,000. It is said to be “ordinary” when the value of the corporation’s or the debtor’s realizable assets is greater than $15,000.

In the case of a summary bankruptcy, the meeting of creditors takes place upon request only. The official receiver and the creditors having in the aggregate at least 25% in value of the proven claims in dollars are then exclusively allowed to make such a request. Once the request is received, the trustee in bankruptcy will send a meeting of creditors notice in the prescribed form and matter. All creditors, the bankrupt and the office of the official receiver will get a copy of this notice. The meeting must be held within 21 days after the issuance of the meeting notice.

As for the ordinary bankruptcy, the trustee automatically calls the meeting in the prescribed form. Here again, all creditors, the bankrupt and the office of the official receiver will get a copy of this notice. The notice will provide details on the first meeting of creditors, which must be held within 21 days after the appointment of the trustee.

The meeting of creditors is generally held at the trustee’s office. But it is common practice to hold it in the debtor’s or the bankrupt’s locality. The official receiver may even authorize that the meeting take place somewhere else.

The official receiver can also suggest holding the meeting of creditors within a 10-day limit if he considers that such a measure is in the interest of the creditors. However, this limit may be extended to a maximum of 30 days should the receiver be convinced that special circumstances justify it.

The following documentation is usually provided with the meeting notice:

• a list of creditors with the amount of their claims (amounting to $25 or more)
• a proof of claim form
• a proxy in the prescribed form

In the case of a personal bankruptcy, the following elements must particularly be set out:

• information concerning the financial situation of the bankrupt
• the obligation of the bankrupt to make payments to the estate

The notice calling for the first meeting of creditors must also be published by the trustee in a local newspaper.

First meeting of creditors objectives

The first meeting of creditors aims at:

• examining the bankrupt’s affairs
• affirming the appointment of the trustee or substituting another in place thereof
• appointing inspectors
• giving such directions to the trustee as the creditors may see fit with reference to the administration of the estate

Composition of the meeting of creditors

The meeting of creditors usually brings together the following participants:

1. the official receiver

   He acts as a representative of the Office of the Superintendent of Bankruptcy. He chairs de first meeting of creditors but, in most cases, he delegates this task to the trustee in bankruptcy.

2. the trustee in bankruptcy

   He reports to the creditors the affairs of the bankrupt and answers their questions. He submits the action plan anticipated to liquidate the assets and to ultimately distribute the funds among the creditors.

3. the debtor or, in the case of a corporation, an officer or a director

   His presence at the meeting is crucial since he will then be called upon to answer the questions of the creditors and to provide any information considered necessary.

4. the creditors, in person or by proxy

   Even though not required to do so, creditors should participate in the meeting to defend their interests.

Procedure governing the meeting of creditors

• The official receiver or the designated person (usually the trustee) chairs the meeting of creditors.
• The chair of the meeting verifies whether or not there is a quorum. The quorum exists as soon as one creditor eligible to vote is present. If there is no quorum, the chair may adjourn the meeting to a later or unspecified date.
• The creditors affirm the appointment of the trustee or appoint another trustee. If the quorum does not exist, the trustee is automatically confirmed in his functions.
• The chair informs the meeting members of the decisions taken about the questions or disputes arising at the meeting. Any creditor may appeal to the court against any such decision.
• The chair admits or disputes the creditors’ claims.

Appointment of the inspectors

• At their first meeting, the creditors may appoint up to 5 inspectors to supervise the assets of the debtor. This type of appointment is made by resolution.
• The creditors or inspectors can give directions to the trustee during the meeting of creditors.

Closing of the meeting of creditors

• Once all the items of the agenda of the meeting of creditors are covered and all topics have been discussed, the trustee in bankruptcy closes the meeting.
• The trustee then prepares the minutes of the meeting, which are to be kept with the file’s records and documents.

Should you need answers to any question related to the meeting of creditors, please do not hesitate to contact a Ginsberg Gingras professional.