Monday, September 03, 2018

Decisions to Establish a Committee

We have seen a couple of instances recently where only one or two creditors have voted at a decision by correspondence to fix the basis of the officeholder’s remuneration. As is required by the Rules (other than in CWUs) the officeholder invited creditors to establish a committee at the same time, also by way of a decision by correspondence. Unfortunately, the creditors who voted to approve the officeholder’s remuneration also voted in favour of the decision to establish a Committee. As a result, the creditors voted to establish a Committee, albeit with no nominations as to who is to act on the Committee.

It was not possible to rely on the decision of the creditors fixing the officeholder’s remuneration passed at the same time, since it would fall to the Committee to fix it once it had been established. This situation is covered by rule 17.5(4), which provides that where a decision has been made by the creditors to establish a Committee, but not as to its membership, the officeholder must then seek a decision from the creditors as to who is to act as the members of the Committee. If creditors nominate at least three creditors to act on the Committee during that second decision procedure, and they agree to act, then the Committee will be duly established. If, however, creditors do not nominate at least three creditors to act, then at that stage the officeholder can say that no Committee has been established and go on and seek a decision from the creditors to fix the basis of their remuneration. Note that the original fee “approval” obtained at the earlier decision procedure cannot be relied upon and a new decision is needed.

Rather than holding a further decision procedure to fix the basis of remuneration, when seeking the decision to nominate Committee members the officeholder can seek a decision to fix the basis of remuneration at the same time. The notice convening the decision procedure just needs to make it clear that the decision will only be sought if insufficient nominations are received for creditors to act on the Committee.

One other point to remember in all this is that once a creditor has voted at a decision procedure, other than a meeting, they cannot change their vote. As a result, even if you spot that the only votes you have from creditors during the first decision procedure are in favour of all the resolutions you sought, i.e. in favour of both the formation of a Committee and your fees, you cannot get them to change them and vote against the formation of the Committee.