For cases commenced on or after 6 April 2010 the liquidator or trustee can now seek a resolution by correspondence in liquidations and bankruptcies. The requirements to take advantage of this are set out at rules 4.63A and 6.88A, but it is subject to one significant exception. Where the Act requires the resolution to be passed at a meeting, then you cannot take the resolution by correspondence, but must convene a meeting instead.
The provisions relating to passing resolutions to fix the basis of the office holder’s remuneration are all contained in the rules, so does this mean that you can obtain approval of your remuneration by passing a resolution by correspondence rather than at a meeting?
Clearly you can in administrations because the legislation refers to the administrator convening a meeting of creditors by correspondence, not just to seeking resolutions by correspondence.
In bankruptcy and liquidations, with the exception of an MVL, the hierarchy of those responsible for fixing the basis of your remuneration is: the committee, if one is appointed; the creditors; and the Court. As a result, it is always appropriate to give the creditors the opportunity to appoint a committee before seeking a resolution from them fixing the basis of your remuneration. If you do not, then you are effectively disenfranchising them and over-riding the statutory hierarchy for remuneration approval. This is where there is a problem as the provisions dealing with the appointment of a committee, sections 101 (CVLs), 141 (compulsory liquidations) and 301 (bankruptcies), all refer to a meeting of creditors being held to pass a resolution establish a committee. Because these are sections in the Act, and not Rules, you cannot take a resolution by correspondence to appoint a committee.
You are required to give creditors notice of your appointment following appointment by the Court or the Secretary of State in bankruptcies and compulsory liquidations. At the same time you must either convene a meeting of creditors to appoint a committee, or inform creditors that you do not intend to do so, leaving it for them to requisition one. If you give notice that you are not convening a meeting to appoint a committee, but instead seek a resolution by correspondence to fix the basis of your remuneration that is effectively disenfranchising the creditors from having the opportunity to appoint a committee. As a result, we consider that you should not take such an approach and we have seen plenty of evidence over the years that the regulators take a dim view of obtaining fee resolutions without first seeking a committee.
We recommend that when giving creditors notice of your appointment you should convene a meeting of creditors for the purpose of appointing a committee at the same time. The notice convening the meeting should make it clear that the purpose of the meeting is to consider the appointment of a committee, failing which to seek a resolution fixing the basis of the office-holder’s remuneration. That approach then ensures there is no doubt that you have authority to draw your remuneration and it is not open to challenge by say a dissenting creditor, a monitor, or a successor IP.
In cases where you are appointed liquidator or trustee at a meeting of creditors, because the creditors have been given the opportunity to consider the appointment of a committee at the meeting appointing you, then there is no need to convene a further meeting to consider a resolution to appoint a committee. In those circumstances, you can seek a resolution fixing the basis of your remuneration by correspondence without first having to call a meeting.
This is not really an issue in CVLs as the section 98 meeting should always consider a resolution to appoint a committee first. If, for some reason a remuneration resolution is not sought at the section 98 meeting, or is not passed, then as long as a resolution to appoint a committee was considered at the meeting then you can merely seek a resolution from the creditors fixing the basis of your remuneration. Again, the remuneration resolution can be sought by correspondence.
