Creditors' meeting

What it means

A creditors' meeting is the gathering of creditors in bankruptcy or restructuring that decides key questions in the proceedings. It elects the creditors' committee, can propose replacing the insolvency trustee and, in restructuring, votes on adopting the restructuring plan.

The first creditors' meeting is convened by the court. Further meetings may be called by the trustee, including at creditors' request. The meeting is the main forum where creditors can influence the course of the proceedings, so it is important to attend or be represented.

Creditors' votes are weighted by the amount of their filed and admitted claims. A creditor with a large claim therefore has more influence than one with a small claim. Special rules apply to some decisions, for example for secured creditors or parties related to the debtor.

How it works in practice

To attend and vote, a creditor must file its claim properly and on time. The claim filing must meet the statutory requirements and be submitted within the deadline, otherwise the creditor may have no voting rights and may also lose its share of the proceeds.

In restructuring, the creditors' meeting votes on the restructuring plan, usually by classes of creditors. The plan sets how much of the claims the debtor will pay and when, so the vote has a direct financial impact on creditors.

A company that is a creditor in a customer's bankruptcy should follow announcements in the Commercial Bulletin, prepare evidence for its claim and decide whether to attend the meeting in person or through a representative, such as a lawyer.

What to watch out for

If a creditor does not attend, decisions are taken by others and may be unfavourable to it. Staying passive when the creditors' committee is elected or the plan is voted on means losing the chance to influence the outcome.

Creditors related to the debtor, such as shareholders or affiliated companies, may have limited voting rights. If there is a suspicion that some creditors are trying to control the proceedings to the detriment of others, it is advisable to consult an insolvency law specialist.