Creditors' committees
In the majority of procedures, creditors have the option of creating a creditors committee.
Role of the committee
The role and involvement of the committee varies depending upon the type of procedure, for example in Administrative Receivership the role of the committee is to review the practitioner's insurance bond and has little other role whereas in a liquidation their views on legal action, conduct of the case and remuneration of the liquidator may be considered.
Requirements for a committee
At least 3 creditors must agree to act on the committee, with a maximum of 5. If the number falls below 3 then the committee will cease to exist;
The members must be individuals, but they can represent companies;
Members cannot be undischarged bankrupts; and
Individuals cannot represent more than one member of the committee - they can only have one vote each.
Meetings and voting
Meetings may be called by members of the committee but usually it is the practitioner who does this when they have a matter to discuss. Usually an initial meeting is held at which an agreement is made to report in writing by post.
A practitioner may seek postal resolutions for decisions that need to be made by the committee if they wish to avoid the costs of holding a physical meeting.
When voting each member has one vote rather than it being calculated by reference to the value of debt. A resolution is agreed when a majority of members vote for a resolution.
Other matters
There are restrictions on members of committees acquiring assets of the insolvent entity concerned. This does not necessarily prevent this but it may make the process more complicated and lengthy.
Committee members are usually entitled to claim a certain level of expenses for attending meetings - this should be discussed and agreed with the practitioner prior to incurring the costs.
