If you are involved in an insolvency process, you may have the opportunity to join a committee of creditors to assist the insolvency practitioner in fulfilling their duties. This committee may be called a liquidation committee or a creditors’ committee, depending on the type of insolvency process.
The purpose of the committee is to either help the insolvency practitioner make key decisions or to provide the insolvency practitioner with any specialist knowledge he may need. The committee cannot direct the insolvency practitioner, but their views should always be taken into account.
To form a committee, there must be a minimum of three creditors with an unsecured debt claim who are willing to act as a member of the committee. The maximum number of creditors who can sit on the committee at any one time is five. Any creditor can be nominated to sit on the committee, and they do not need any special qualifications or experience.
As a committee member, you will be expected to attend meetings, make decisions, and approve the basis of calculating the Office-holder’s remuneration. You may also be able to request additional information from the insolvency practitioner.
It is a voluntary role, and committee members are not paid for their time. However, they may be able to recover reasonable travelling expenses incurred in attending physical meetings of the committee.
Being a member of a committee is a responsible position representing the creditors as a whole. It is important to consider that a committee member cannot allow a private interest to conflict with their duties or derive a profit from their position.
Whilst the insolvency practitioner is required to invite creditors to form a committee, there is no requirement for there to be one in every insolvency.
This article is intended to provide an overview only. Detailed provisions regarding the membership, formation, functions, and procedural operation of a committee are set out in legislation (Insolvency Act 1986 and Insolvency Rules 2016).
If you have any further questions about being on one of my committees, please do not hesitate to ask.