A liquidation committee is a small group of creditors, at least three, elected to supervise and assist the liquidator on behalf of all creditors. It fixes the basis of the liquidator’s fees, must approve any fees above the estimate, receives regular reports and is told about sales to connected parties. Creditors join one to gain influence and information they would not otherwise have, at little cost to themselves.

The rules below apply in England and Wales. In an administration or bankruptcy the equivalent body is called a creditors’ committee and works in much the same way under Part 17 of the Insolvency (England and Wales) Rules 2016.

What is a liquidation committee for?

Rule 17.2 gives every committee two general functions: to assist the office holder in carrying out their functions, and to act in relation to the office holder in whatever way is agreed from time to time. The Insolvency Service’s guidance for creditors puts it more simply: the committee supervises and assists the liquidator on behalf of the creditors. On top of that the Insolvency Act 1986 and the Rules give the committee specific powers, set out below. It is not a board of directors: the liquidator still makes decisions, but the committee holds them to account between reports.

How is a committee set up in a creditors’ voluntary liquidation?

Whenever creditors are asked for a decision in a creditors’ voluntary liquidation, including the first decision on who the liquidator should be, the convener must at the same time invite them to decide whether a committee should be set up and invite nominations by a stated date (rule 6.19). Only creditors who meet the eligibility test in rule 17.4 can be accepted.

Under section 101 of the Act the creditors may appoint a committee of not more than five persons, and rule 17.3(2) requires at least three. The company in general meeting may also appoint up to five members, but the creditors can decide that any of them should not serve, in which case they cannot act unless the court directs otherwise.

Each member must agree to act (rule 17.5(2)). The committee does not exist, and cannot act, until the liquidator has sent a notice of its membership to Companies House (rule 17.5(5) and (9)).

How does it work in a compulsory liquidation?

After a winding up order, section 141 provides for a committee if the creditors and contributories decide on one; if only one group wants it, it is still set up unless the court orders otherwise. A liquidator other than the official receiver must seek that decision if asked by one tenth in value of the creditors (section 141(3B)).

The committee must have three to five creditor members and, where the company was not wound up for inability to pay its debts, up to three contributory members elected by the shareholders (rule 17.3(3)). While the official receiver is liquidator, or where there is no committee, its functions are vested in the Secretary of State (section 141(4) and (5)). If all creditors are paid in full with interest, the committee ceases to exist once the liquidator files a notice to that effect (rule 17.13).

Who can be a member?

Under rule 17.4 a creditor is eligible if they have proved for a debt, the debt is not fully secured, and the proof has not been wholly disallowed for voting or wholly rejected for dividend. Nobody can sit as both a creditor and a contributory. A company can be a member but must act through an appointed representative (rule 17.17).

Membership ends automatically if a member becomes bankrupt, misses three consecutive meetings without being represented (unless the third meeting resolves otherwise), stops being eligible or stops being a creditor (rule 17.11). A member can resign in writing (rule 17.10) or be removed by a creditors’ decision on at least 14 days’ notice (rule 17.12).

What can the committee actually do?

  • Fix the liquidator’s fees. In a creditors’ voluntary or compulsory liquidation it is for the committee to determine the basis of remuneration; creditors only decide if there is no committee or it fails to act (rule 18.20). See how insolvency practitioners’ fees are approved.
  • Approve going over the estimate. Where there is a committee, any request to draw fees above the fees estimate goes to it (rule 18.30).
  • Keep directors’ powers alive. In a voluntary winding up the directors’ powers cease on the liquidator’s appointment except so far as the committee, or if none the creditors, sanctions their continuance (section 103).
  • Hear about connected party sales. A liquidator who sells company property to a connected person must notify the committee (section 165(6) in a voluntary winding up; section 167(2) in a compulsory one, which also covers employing a solicitor).
  • Be warned of pre appointment payments. In a creditors’ voluntary liquidation the liquidator must give the committee five business days’ notice before paying the costs of the statement of affairs and initial decision, and payments to the liquidator or an associate need approval (rule 6.7).
  • Get information. In a liquidation the liquidator must report to members at least every six months unless the committee agrees otherwise, report when directed and answer the committee’s requests for information (rule 17.23).

The liquidator can refuse a direction that is frivolous or unreasonable, would cost too much relative to its importance, or cannot be funded. If the committee is formed more than 28 days after appointment, the liquidator must give a summary report of action taken so far and answer questions about it. The committee also keeps access to the liquidator’s records of the case.

How do committee meetings work?

The liquidator calls the first meeting within six weeks of the committee being established and must call another within 21 days if any member asks (rule 17.14). Members get five business days’ notice unless they waive it. A meeting is quorate with two members present or represented (rule 17.16), each member has one vote, and resolutions pass by a majority of those attending or represented (rule 17.18).

Much business is done by correspondence. The liquidator sends the proposed resolution, and it passes if a majority of members agree, unless a member requires a meeting within five business days (rule 17.19). Meetings can be held remotely where the liquidator thinks it appropriate (rule 17.20). Reasonable travelling expenses are paid from the estate, except for a meeting held within six weeks of the last one that the liquidator did not call (rule 17.24).

What restrictions apply to members?

Rule 17.25 applies to anyone who is, or in the previous 12 months has been, a member, a member’s representative or an associate of either. They must not, as a result of a transaction, be paid from the estate for goods or services, profit from the administration of the estate or buy an estate asset, unless the committee gives prior sanction after full disclosure and is satisfied full value is given, or the court permits it. A member involved in the transaction cannot vote on it, and the court can set aside a transaction that breaks the rule and order an account of profits.

Why would a creditor join one?

Illustration only. Calder Ltd goes into creditors’ voluntary liquidation owing £600,000. Its three largest unsecured creditors, a materials supplier, a landlord and a finance company, are owed £350,000 between them and suspect the directors moved stock to a new company. They stand for the committee. As members they approve the liquidator’s fee basis, including a capped time cost budget for investigating the directors, are told when the liquidator proposes selling remaining stock to a business connected with the directors, and receive six monthly reports. When the investigation budget is close to being exceeded, the liquidator must come back to them first.

Creditors join for influence over fees and strategy, earlier sight of investigations and recoveries, and a direct line to the liquidator. The time cost is modest and travel expenses are covered. The trade off is the dealing restriction above, which can rule out buying assets from the estate.

What mistakes do creditors make?

  • Failing to send a nomination by the date in the notice, so no committee is formed.
  • Not lodging a proof of debt first, which makes a creditor ineligible.
  • Missing three meetings in a row and losing membership automatically.
  • Agreeing to buy assets from the estate without the committee’s prior sanction.
  • Expecting to run the liquidation: the committee supervises, but the liquidator decides.

For related topics see proof of debt in insolvency and compulsory liquidation.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.