Remove A Liquidator
There are only two procedures available in law to remove a liquidator in an insolvent liquidation. One way is to requisition a decision of the creditors and the other way is to apply to the court for the liquidator’s removal. Once a liquidator has been appointed, their removal is generally not an easy thing to do.
Other indirect ways exist for creditors to encourage a liquidator to voluntarily surrender their position, such as simply asking them to leave the role. Although not a recognised way for a creditor to encourage the liquidator’s removal, creditors can nevertheless exercise their rights to commercially control a liquidator, such as voting on a liquidator’s fee estimate. However, such methods are voluntary, indirect, and there is no certainty about the outcome.
Requisitioning A Decision Of Creditors To Remove A Liquidator
The most common way to remove a liquidator when creditors are unhappy is to requisition a decision procedure of creditors.
This procedure is a right available to creditors provided they have at least 25% of the creditors based on the value of the debts, asking the liquidator to convene a decision procedure by vote or meeting for their removal.
Removal Requisition Procedure
The removal requisition procedure requires a creditor to notify the liquidator in writing that they seek their removal and to list the creditors and the size of their debts that amount to at least 25% of the creditors who wish for the liquidator to be removed. The creditors triggering the procedure will need to supply evidence of meeting the 25% threshold.
Once the liquidator is on notice, then he or she will have to decide whether they require a deposit in order to fund the costs of the removal procedure. If they require a deposit, then within 14 days of receipt of the creditors' request, the liquidator must supply a breakdown of the amount required for the deposit sum.
If the deposit is paid, then the procedure for removal must be held within 28 days. Until or unless the deposit is paid, the liquidator is not required to undertake the procedure.
Application To Court To Remove A Liquidator
To apply to court will generally be the more difficult of the two possible ways to remove a liquidator from their role over a company. The court needs to be shown evidence of the reason a removal should take place.
The court will generally be reluctant to remove a liquidator without good cause but misconduct does not have to be shown.
To successfully apply to court to remove a liquidator will necessitate showing the court that there is good cause to remove the liquidator. If the court can see that the liquidator is doing their job properly, it will be slow to remove him or her. If the court considers the liquidator is not living up to the necessary standards expected of an officer of the court or feels that they will not do so, then they will be more willing to consider removal.
Voluntary Removal Of A Liquidator
A liquidator can sometimes be encouraged to be removed by a creditor simply by making a request. Such an option is entirely voluntary and lacks the ability to enforce the removal.
Creditors may seek to use other means to try to control a liquidator through exercising their rights, such as tactically voting on the liquidator's fee estimate, for example, which may perhaps make it commercially unviable or undesirable for a liquidator to continue in office after fulfilling their basic functions. However, although such a position can be unwelcome for a liquidator, creditors may well find that it does not work as the liquidator can apply to the court to have their fee basis approved by the court instead, or the creditor seeking the removal may be outvoted by other creditors.
