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A liquidator has specific powers set out at Schedule 4 of the Insolvency Act 1996.

The creditors can monitor the activities of a liquidator by establishing a liquidation committee.

Liquidation Committee

At the first meeting of creditors, creditors have a right to appoint a liquidation committee. This committee must have at least 3 members, but a maximum of 5 is permitted.

A liquidator requires the sanction of the committee to exercise his powers as follows:-

• to pay any class of creditor in full
• to enter into any compromise or arrangement with creditors
• to enter into compromise of any debts due to the company
• to take security for the discharge of a debt

The committee is also responsible for reviewing the liquidators bond and fixing the liquidators remuneration.

The committee assists the liquidator in deciding how to deal with key issues that arise in the liquidation.

When a committee is established the liquidator has a duty to report on matters that appear to him and those that the committee has indicated as being a concern. All members should be informed of significant developments and their approval obtained on material transactions such as:

• litigation
• sale of material assets
• dividend payments to creditors

Fees

The Liquidators remuneration is fixed by the liquidation committee or creditors by way of a resolution passed at the first meeting of creditors.

Fees must be fixed either

• by reference to time spent by the liquidator and his staff or
• as a percentage of the realisations or distributions

A liquidator can request that the creditors increase the fees, should the committee fix the fees too low and may appeal to the court for a decision on what has been set.

Once remuneration is fixed, the liquidator can draw fees up to the amount fixed. If this proves too low, the committee or creditors can be asked to increase them.

Annual Meetings

Whether or not a committee is established, on the anniversary of the liquidation, the liquidator must call an annual meeting to report to all creditors, the progress of the liquidation and provide a copy of his receipts and payments account.