What’s the Purpose of a Liquidation Committee?

The liquidation committee, sometimes known as the creditor’s committee (though not always since, rarely, shareholders may be members) is a committee “designed to represent the interests of the creditors as a whole, not just individual members. Intended to sanction the exercise of certain of the liquidator’s powers, and to agree his payment structure, the liquidation committee may also serve to assist the insolvency practitioner and provide a forum for him to better understand the creditors’ voluntary liquidation. In more cases, a liquidation committee would be comprised entirely of the creditors of an insolvent company.

Sanctioning the Director’s Powers

Although in most company directors cease to hold power over the company’s affairs once the company has gone into liquidation, in certain situations a liquidation committee may decide that there is a requirement for them to continue. In this scenario, the liquidation committee has the power to allow their continuance.

What Should the Liquidation Committee Expect from the Insolvency Practitioner?

Within reason, a liquidation committee has a right to request any information from the IP, although if the insolvency practitioner deems this unreasonable, he need not comply. One exception to this right to information concerns any documents passing between liquidator and the Insolvency Service concerning possible disqualification of directors. These documents are outside the statutory rights of the liquidation committee; therefore, the committee merely has a right to put questions to liquidator about their contents.

The Establishment of the Committee

In a CVL, the creditors may appoint a committee of no more than five persons, nor less than three. It is better to appoint either three or five rather than four to avoid the risk of voting deadlocks. Shareholders may then appoint five choices from their ranks, though it is the right of the creditors to exclude any of the shareholder’s nominees unless specifically directed by the court. When administration directly precedes a creditors voluntary liquidation, the creditors’ committee already established any administration will become liquidation committee for the CVL.


Committee members cannot receive any remuneration for the services, other than reasonable travelling expenses incurred on committee business.

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