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Remove A Liquidator Overview

There are three ways to remove a Liquidator:

  • a Decision Procedure such as a Meeting of Creditors; or
  • an application to Court; or
  • a request to the Liquidator to leave office.

If creditors are unhappy with the Liquidator they can remove him or her and replace them with another Liquidator.

Are you a dissatisfied creditor in a Liquidation looking to replace or remove a Liquidator and have someone else take over?

Ways To Remove A Liquidator

Why Would You Remove A Liquidator?

There might be a number of reasons creditors want to remove a Liquidator:

  • A failure to respond to creditor communications and their wishes.
  • A failure to investigate the directors of the company that has gone into Liquidation.
  • Concerns about the sale of assets for less than their value.
  • Creditors concerned the Liquidator is acting in the interests of the Directors.
  • A Liquidator is unwilling to disclose information and documentation to the creditors.

However, a Liquidator might have a good reason for having conducted himself or herself in a way that might be at odds with what a given creditor wants.

Insolvency is when creditors come together and their interests are furthered as a group, not individually. Their interests are pursued by the Liquidator for their benefit as a whole. The assets are then once realised, after costs and expenses of the Liquidation then distributed pursuant to a statutory order of payment set out in Rule 7.108 of the Insolvency (England and Wales) Rules 2016.

The Insolvency Act 1986 sets out the requirements for Liquidator removal in Voluntary Liquidation in Section 171 of the Insolvency Act 1986. For Compulsory Liquidation, the position is set out in Section 172 of the Insolvency Act 1986.

How To Requisition A Decision Procedure To Remove A Liquidator

A Liquidator may be removed from office by a Decision Procedure when a company’s creditors vote to remove the Liquidator.

To requisition a Decision Procedure to remove a Liquidator is undertaken by compliance with Rule 15.18 of the Insolvency (England and Wales) Rules 2016. The key is having 25% of creditors by value supporting a liquidator’s removal so they can be replaced with another person.

requisition a creditor meeting to remove a liquidator

This procedure may well involve the need to pay a deposit as security for the costs of convening the procedure by virtue of Rule 15.19 of the Insolvency (England and Wales) Rules 2016. To require a creditor deposit the Liquidator will need to ask for it within 14 days of the request for the voting procedure.

Requisition A Decision Procedure In A Creditors Voluntary Liquidation

In a Creditors Voluntary Liquidation if you wish to remove a Liquidator, then according to Rule 15.18(4) of the Insolvency (England and Wales) Rules 2016 the creditors seeking the voting procedure must amount to 25% of creditors by value, not including those creditors connected with the company. In practice, this will be unconnected creditors with unsecured claims against the company.

Requisition A Decision Procedure In A Compulsory Liquidation

In a Compulsory Liquidation if you wish to vote to remove a Liquidator, then according to Section 172(3) of the Insolvency Act 1986 creditors must amount to 25% of creditors by value. In other words, if the total amount of creditors is £100,000 spread across 20 different creditors then all that is required is for £25,000 worth of creditors to come together to support the request for a decision to remove the Liquidator. As in the case of a Creditors Voluntary Liquidation, only the unsecured creditors will be permitted to vote.

How to Apply to Court to Remove a Liquidator

A Liquidator may be removed from office by an order of the Court.

A Court application for a Liquidator’s removal requires a good reason. Removal of the Liquidator is not intended to be a procedure capable of being done too readily or for reasons unrelated to the Liquidator’s material conduct in the administration of the insolvency estate (Liquidation, Administration, Bankruptcy etc).

It would be expensive if Liquidators were replaced on a routine basis. Imagine the duplication of effort alone that would be required for a new Liquidator to get up to speed on what has been going on and why the company entered insolvent liquidation. Such costs would be at the expense of all creditors.

application to court to remove a liquidator

A Liquidator is a Licensed Insolvency Practitioner and Officer of the Court. The Court is not going to remove a Liquidator without some reasonable basis for doing so. Consequently, if creditors want to remove the Liquidator they have to have good reason. But what is good reason?

What is a Good Reason To Remove A Liquidator?

Good reason to remove a Liquidator will depend. The burden will be on the creditor to show why the Liquidator ought to be removed.

the court expects any liquidator to be efficient, vigorous and unbiased

In general terms the Court will expect the Liquidator to have been efficient, vigorous and unbiased; if not the Court may exercise its discretion to grant removal. However, an effective and honest liquidator will usually not be removed. Misconduct itself is not a prerequisite for an application for removal to succeed.

An example of how the Court viewed “vigour” in a particular case, can be seen in the matter of Re Keypak Homecare Ltd [1987] BCLC 409 where Millett J said:

If the liquidation had been conducted with any vigour at all, long before now the liquidator would be in a position either to allay the suspicions of the creditors or to lay papers before solicitors with a view to starting proceedings. Such proceedings might well include an application for the appointment of a receiver of Northern Brass Ltd. It need hardly be said that any such proceedings have to be conducted with great speed. Stock which has disappeared from one company is very likely to disappear from another under the same control.

There is nothing that can be said against Mr Edgar so far as his personal integrity is concerned. There is no evidence of any misconduct or wrongdoing on his part, or of his intimacy or friendship with the directors of the company at all. He is a professional, independent, and experienced liquidator. But I am not impressed by his performance in the conduct of this liquidation. I take the view that his experience, gained in times when liquidators were accustomed to directors simply removing the stock before liquidation and then paying for them afterwards at forced sale values, has stood him in ill stead. As a result, he has adopted a relaxed and complacent attitude to such conduct, and in my judgment the creditors, who were outraged by what they believed had happened, were perfectly reasonable in the view that Mr Edgar was not likely to pursue the directors with anything like sufficient vigour. If that was the view they adopted at the meeting, then it has been amply confirmed by all that has taken place since. I, too, take the view that Mr Edgar is unlikely to pursue the directors with anything like sufficient vigour.

In circumstances such as the present, the creditors are entitled to expect either the suspicious matters to be cleared up very shortly after the creditors’ meeting, or proceedings to be commenced against the former directors with speed and pursued with vigour. A liquidator who can see from the statement of affairs that there are likely to be insufficient assets to enable him to discharge his duties ought to make the position clear at the meeting of creditors and insist on being authorised by those present at the meeting to take such steps as may be necessary. But simply to stand back and do nothing and then claim that that is justified by the lack of finance is not, in my judgment, good enough.

Why Do Applications To Court By Creditors To Remove A Liquidator Often Fail?

An application to Court by a creditor to remove a Liquidator often fails because the burden is on the creditor making the application to demonstrate that there is a real need and benefit for the Liquidator to be removed. A lack of evidence is likely to be one of the main reasons why such an application might fail. It is also likely to be an expensive risk for a creditor to take because if the application is unsuccessful then the creditor will typically be liable to pay not only its own legal costs but the legal costs and expenses of the Liquidator that they sought to remove from office.

If an application to Court by a creditor to remove a Liquidator is largely confined to a series of speculative grievances that the creditor has concerning the conduct of the Liquidator, then that is unlikely to be sufficient to demonstrate to the satisfaction of the Court the Liquidator has done something wrong. A Court is generally going to be reluctant to step in and take the serious step of removing the Liquidator from office without proper evidence of either misconduct or insufficient diligence.

In exercising its discretion of removal a Court will in effect be substituting its view for that of the Liquidator by removing him or her from office and could be seen to be sending a message to the Liquidator being removed: ‘you could and should have done a much better job’.  The Court will be alive to the potentially serious professional implications that can sometimes arise from stepping in and making such a move and having also to provide its reasons for taking such robust action against a Liquidator.

For more information on why such applications are potentially difficult our article Why Is Creditor Removal Of A Liquidator Hard? explains matters further.

Case Study: Remove A Liquidator

In the case of Re Fox Street Village Ltd [2020] EWHC 2541 (Ch) (“the Fox Street Case”) an application was made by a creditor seeking to remove the Insolvency Practitioners from office.

The case is useful because it demonstrates some of the difficulties that can be faced and hurdles that need to be vaulted for creditors to remove a liquidator. In that case which is the subject of a Blog post on this site called Application For Removing Administrators Dismissed, it was an Administrator involved but most of the key principles are the same for a Liquidator.

In the Fox Street Case, a point made by the Court included that matters concerning conduct arising before the appointment of the Insolvency Practitioners would not obviously have been relevant. It is the conduct of the Insolvency Practitioners themselves that is in question when a removal application is being considered, except where there is for example only, some evidence of inappropriate collusion. In other words, the fact that other parties prior to the appointment of an Insolvency Practitioner have (at least perhaps in the minds of a creditor) behaved incorrectly is not usually going to have much or indeed any relevance to the matter of the removal of an Insolvency Practitioner from office who was appointed afterward. Additionally, there appear to have been communication difficulties that raised suspicions but even so, that was not considered sufficient grounds for removal.

Request The Liquidator Removal

Another way to remove a Liquidator is to ask them to leave office voluntarily. When a creditor is unhappy with an Insolvency Practitioner they can simply ask them to accept being removed and in some cases, this can work.

There may be circumstances in which a Liquidator is actually happy to let someone else take over the conduct of the company in Liquidation, so it is always worth asking the question. You might be pleasantly surprised by the outcome.

GET IN TOUCH FOR HELP

For a free no obligation chat about any of the matters detailed above, please do get in touch for help. An expert will call you back or if you prefer exchange emails with you on the subject.

We can explore your situation and consider the best way to help you and your business needs. You can call us 020 3925 3613 or fill in the form below and will get back to you quickly. We Know Insolvency Inside Out.

Author: Elliot Green
Last Updated: April 13, 2024

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Disclaimer: How To Remove A Liquidator

This page is not legal advice and should not be relied upon as such. How To Remove A Liquidator is provided for information purposes only. You can Contact Us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

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