Legislation
Rules

 
Part 17, IR16 - Creditors’ and Liquidation Committees

This common part consolidates the procedures in relation to the formation and function of Creditors' and Liquidation Committees. Under the 1986 Rules, these had previously been repeated in each of the sections of the Rules pertaining to administration, administrative receivership, creditors' voluntary liquidation, winding up by the court and bankruptcy. Repetition of the shared procedures and processes has been removed and consolidated in Part 17 of the 2016 Rules with few changes to the Rules relating to the operation of a creditor or liquidation committee.

One difference in the new rules relate to formation. Rule 17.5 states that Committees will now formally be established only once a notice is filled at either Companies House or court (in the case of a bankruptcy). The practical consequence of this new requirement is that the first meeting of the committee will not be able to take place immediately after the meeting (or decision procedure) at which the committee was nominated.

A further notable difference relates to where office holders are required to invite creditors to form a committee. An administrator must invite creditors to form a creditors' committee when seeking approval of proposals (r3.39) and similarly, an administrative receiver must do so when delivering the report under s48 Insolvency Act 1986 (r4.15). In a compulsory winding-up, the invitation must be given where a decision is sought on the appointment of a liquidator.

In a bankruptcy (r10.76), a creditors' voluntary liquidation and in a members' voluntary liquidation conversion pursuant to s96 IA 1986 (r6.19), whenever a decision is being put to creditors, at any point during the respective insolvency procedure, the office holder must invite creditors to form a committee. The notice of the decision making procedure must be accompanied by an invitation for nominations for membership of a committee which states that any nominations be delivered to the convener by a specific date and may only be accepted for eligible persons.

The practical difficulties posed by this obligation in respect of committee formation at every creditor decision have been raised with the Insolvency Service. There has been some indication from them that the obligation could be satisfied by using a negative deemed consent proposal that a committee will not be formed. We are awaiting written confirmation and will update members accordingly once this is received.

Other than these minor modifications, the rules relating to formation, powers, eligibility of members, constitution and operation of committees remain unchanged in this consolidated common part.

April 2017

 

 

Ben LuxfordBen Luxford
Head of Technical
020 7566 4218
Find INSOLVENCY & RESTRUCTURING ADVICE

R3 members can provide advice on a range of business and personal finance issues. To find an R3 member who can help you, click below.