Creditors’ Committees:
A Guide for Creditors
March 2023

CREDITORS’ COMMITTEES: A GUIDE FOR CREDITORSThis Guide is intended to provide you with:•an understanding of the role of acommittee comprised primarilyof creditors (Committee) that may
be established in the course of theinsolvency proceedings;•information on how a Committee isformed;•

and guidance on what might beexpected of you should you choose toserve as a member of a Committee,
to enable you to make an informed
decision as to whether you wish toeither seek to form a Committee orto nominate yourself to serve on aCommittee.

This Guide provides an overview only.
Detailed provisions regarding themembership, formation, functions andprocedural operation of a Committee areset out in legislation (Insolvency Act 1986
and Insolvency (England and Wales) Rules
2016).
Introduction
Most of us will be familiar with the term“committee” which is used to define agroup of people appointed for a specificfunction by a larger group and typicallyconsisting of members of that group.
In the context of an insolvency procedure(Insolvency), the Office-holder appointed
to oversee the process (e.g. liquidator oradministrator) (Office-holder) will invite
creditors to form a Committee either toassist generally in discharging his or her
functions as an Office-holder or, morecommonly, for a specific purpose, suchas where litigation or an investigation isanticipated. Such a committee is calleda “liquidation committee” or “creditors’committee”, depending on the type of
insolvency process. For the purposes ofthis guidance note we will use the term“Committee”.

The role of the Committee in Insolvency
Proceedings
The primary purpose of a Committee isto assist the Office-holder in fulfilling hisor her duties. This could involve helping
them to make key decisions, for example
to take legal action to recover assets, torepresent the interests of the main bodyof unsecured creditors, or to provide theOffice-holder with the benefit of specialist
knowledge either about the company
subject to the Insolvency or the industry inwhich it operates. The Office-holder should
always take into account the views of theCommittee but is not obliged to follow
their wishes. The Committee cannot direct
an Office-holder in relation to the conductof the insolvency proceedings.
In any Insolvency there are a number ofdecisions that creditors may be asked tomake, including how the Office-holder is
to be paid out of the assets of the insolvent
estate. Where there are large numbers ofcreditors or creditors are geographically
remote, having a Committee would enable
the Office-holder to seek certain decisions(e.g. fee approval) from the Committee
which is often a quicker and cheaper
process than seeking a decision from theentire body of creditors. The Office-holder
cannot however bypass the creditors, andask the Committee to make a decision,
where the legislation requires the Officeholder to seek a decision from the generalbody of creditors.
How are Committees formed?
For a Committee to come into being, theOffice-holder must first seek a decisionfrom the creditors as to whether aCommittee should be established andwill invite nominations from creditors
for membership of the Committee.
Generally, there must be a minimum of
three creditors each having a claim foran unsecured debt (Creditor) and who
are willing to act as a member of the1 //CREDITORS’ COMMITTEES: A GUIDE FOR CREDITORS

Committee. The maximum number ofcreditors who may sit on the Committee
at any one time is five, so if more than five
Creditors express an interest in being onthe Committee, there must be a vote on
membership via a decision procedure. Thisvoting process will be managed by theOffice-holder, and other Creditors will begiven the opportunity of deciding whichof the interested Creditors get to form theCommittee. You have to agree in writing
to sit on the Committee so you will neverbe voted onto a Committee without yourknowledge or agreement.
Who can sit on the Committee?
Any Creditor of the insolvent company/individual with an outstanding unsecured
debt may be put forward to sit on theCommittee. If a person ceases to be or isfound never to have been a Creditor for any
reason, they will automatically cease to be amember of the Committee.
You do not need to have any special
qualifications or previous experience as aCommittee member.
Where the Creditor is a company (rather
than an individual person), it must berepresented by an individual who holds a
letter of authority signed by the company,
enabling that individual to act on thecompany’s behalf.
Any member of the Committee may be
represented by another person (Person) towhom they have given a letter of authority
to act, provided that Person is not anothermember of the Committee or is not alreadyrepresenting another member of theCommittee..
A member of the Committee cannot be
represented by:•a body corporate,•

an undischarged bankrupt,•a person whose estate has beensequestrated and who has not beendischarged,•a person to whom a moratorium period
under a debt relief order applies,•a disqualified director, or•a person subject to a bankruptcy
restriction order or undertaking or a debt
relief restrictions order or undertaking.

What will I have to do as a Committee
member?
Business of the Committee is conducted
through meetings (in person or by remoteattendance). Decisions may also be made by
written correspondence and resolutions.
The frequency of meetings and reportingby the Office-holder to the Committee
will generally be agreed between theOffice-holder and the members at the firstmeeting of the Committee; this must be
held within six weeks of the Committee
being established once the Office-holder hasdelivered the requisite notice in accordancewith the legislation.
At the meetings the Office-holder will
update the Committee on relevant mattersand may seek guidance or formal approval
for specific courses of action. In particular,
the Committee will be asked to approvethe basis of calculating the Office-holder’sremuneration..
As a Committee member, you may also beable to request additional information fromthe Office-holder. Depending on the type ofInsolvency, the Office-holder will be required
to provide the information unless the request
is deemed to be unreasonable, frivolous orexcessively costly to provide.
You should try and attend all Committee
meetings, as failure to attend threeconsecutive meetings means you will

2 //

CREDITORS’ COMMITTEES: A GUIDE FOR CREDITORS

automatically cease to be a member (unlessthe remaining members decide to allow you
to remain as a member).
An Office-holder will determine when andwhere a Committee meeting will be held(subject to the six week requirement for
the first meeting mentioned above) when
they think there is something importantwhich requires the Committee’s input orwhen requested to do so by a member ofthe Committee. If you are unable to attend
a meeting you should appoint someone toattend on your behalf. A member or member
representative may also request a meetingfrom the Office-holder.
Can I cease to be a member of theCommittee?
You can resign as a member at any time bygiving the Office-holder written notice tothat effect.
Will I get paid?
Committee members are not paid for theirtime acting on the Committee, this is avoluntary role. However, they may be able
to recover reasonable travelling expenses
incurred in attending Committee meetings.
Why should I agree to be on a Committee?

Insolvency and assist the Office-holder tofulfil their duties to try and maximise returns
to creditors. Members often have access toessential information and knowledge which
could assist in tracing assets which may havebeen misappropriated or identify conduct
by the directors that could ultimately leadto their disqualification by the Insolvency
Service.
It is important to consider that being amember of a Committee is a responsible
position representing the creditors as awhole. A Committee member cannot allowa private interest to conflict with their duties
or derive a profit from their position, as aCommittee member (e.g. you cannot acquire
an asset forming part of the insolvent estate
without the requisite prior sanction or court
permission).
Does a Committee always have to beappointed?
Whilst the Office-holder is required toinvite creditors to form a Committee, there
is no requirement for there to be one inevery Insolvency; there may be insufficient
Creditors willing to form a Committee or insome instances there may be no need for aCommittee.

Serving on a Committee will give you theopportunity to provide your input in the3 //CREDITORS’ COMMITTEES: A GUIDE FOR CREDITORS

R3 is the UK’s leading trade association for licensed insolvency practitioners andbusiness recovery professionals.
R3 does not license or discipline its members; this is the responsibility of thepractitioner’s regulatory body. The regulatory bodies are:
The Institute of Chartered Accountants in England and Wales
Tel: 01908 248 250 		
www.icaew.com
The Insolvency Practitioners Association
Tel: 0330 122 5237 		
www.insolvency-practitioners.org.uk
The Institute of Chartered Accountants of Scotland
Tel: 0131 347 0100 		
www.icas.com
Chartered Accountants Ireland (CAI)
Tel: 00 353 1 637 7200
www.charteredaccountants.ie

Disclaimer
Information in this guide is intended to provide an overview only and relates tocreditors’ committees in England and Wales. It is not a replacement for seeking advice
specific to your circumstances

4 //