Requisition a Decision Procedure to Remove a Liquidator
If you are a creditor and you are not happy with how a liquidator is managing a company’s affairs, you may be able to take action. Under the Insolvency Rules, creditors can request a formal decision process to replace the liquidator, but only if certain conditions are met.
Can a Creditor Remove a Liquidator
Yes, creditors can remove a liquidator, but only if they meet specific legal requirements.
If your debt is secured, you would need to give up your security interest to take part in the vote, treating your claim as unsecured.
The 25% rule applies in both types of liquidation:
- In a creditors voluntary liquidation, creditors who are not connected to the company holding 25% or more of the total debt can request the removal of the current liquidator and propose a replacement.
- In a compulsory liquidation, 25% or more of all creditors applies under section 172(3) of the Insolvency Act 1986.
Step by Step Guide to Removing a Liquidator
If you qualify under the 25% threshold, here is how the process works:
1. Make a Written Request
You must write to the liquidator asking for a formal decision procedure to be set up. You will also need to suggest a replacement liquidator who must be a licensed insolvency practitioner.
2. Pay the Required Deposit
According to Rule 15.19 of the Insolvency Rules, the liquidator can request a deposit to cover the cost of organising the decision procedure. They must tell you the amount within 14 days of receiving your request.
3. A Decision Procedure Is Held
Once the deposit is paid, the liquidator will arrange a vote where creditors can decide whether to remove the current liquidator and appoint a new one.
4. What Happens After the Vote
If the vote goes ahead, and depending on the outcome, the deposit might be refunded.
What If the Liquidator Does Not Comply
The liquidator is required to act once the request meets the rules. If they do not proceed with the decision procedure after you meet the conditions and pay the deposit, you may need to seek legal advice.
Reasons to Consider Replacing a Liquidator
Creditors may want to remove a liquidator for a number of reasons. These could include concerns about how the liquidation is being managed, poor communication, delays, or doubts about whether the liquidator is acting in the best interests of creditors.
Need Advice on Replacing a Liquidator
If you are unsure about the conduct of a liquidator or think they are not doing their job properly, it is a good idea to speak to a professional. At Oliver Elliot, we can help explain your rights and support you through the process if you decide to take action.
