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An overview of committees and working with them

Posted on: 12/01/2022

On Monday 13th November, Malcolm Niekirk held one of his popular Coffee Break Briefing Webinars.

In the webinar, Malcolm looked at Committees. He looked at working with committees, issues that committees deal with, how they are set up and  how members are elected.

This is the summary from the presentation. If you’d like to watch it back, you can do so on our website here. If not, read on for a summary.

What are they for? Remuneration!

This is probably commonly considered to be the main purpose for having a committee.

This article does not discuss remuneration in any great detail. I’m sure the basics are well understood. When you’ve got a committee, it’s the committee that sets the basis for your remuneration.

If the committee is either not in being, or, if it fails to set the basis for your remuneration, you then move on, usually to the creditors.  And then beyond that, either to the court or on to scale rates, depending upon the insolvency procedure.

What are they there for? Other issues.

The creditors’ committee is there for other issues too.
Some specific statutory functions of a committee:

  • Restoring directors’ powers in a CVL
  • Sanctioning a s110 reconstruction in a CVL*
  • Sanctioning calls by a liquidator on shareholders in a CVL
  • Receiving notice of a disposal of assets to a connected party in a CVL
  • Receiving notice (in a compulsory liquidation or bankruptcy) of:
    • Disposal of assets to a connected party
    • Appointment of a solicitor
  • Sanctioning or ratifying a distribution in specie in a bankruptcy (s326).
  • Sanctioning use of an arbitration clause in an unadopted pre-bankruptcy contract (s349A).
  • Applying to court for a new administrator (when an administrator, appointed by administration order, has resigned) (§91 of schedule B1).
  • Releasing a former administrator (most, but not all cases) (§98 of schedule B1).
  • Involvement in setting terms when a trustee sells the bankrupt’s property on deferred payment terms (§3 of schedule 5).

*In a s110 CVL, the sanction needed for the reconstruction has to come from the committee rather than the shareholders (as would be the case in a s110 MVL).

General statutory functions of committees

There are two general statutory functions that all committees have got.

  • Either to assist the office holder.
  • Or to do whatever may be agreed with the office holder.

Of course, in voluntary arrangements, there is no statutory committee.  If there is a committee, its establishment, composition and powers will be set by the terms of the proposal, as approved.

The R3 Standard Conditions for IVAs give the supervisor the power to consult a committee and ask it either for advice or to make a decision. The supervisor may follow the advice or decision that the committee has made but does not have to.

Most voluntary arrangements contain a committee-powers clause similar to that.

The full article goes in to much more detail and can be read here.

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