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August 2002
The function of a liquidation or creditors’ committee is to ensure that the actions of the liquidator or trustee are not beyond his/her powers and that he/she carries out his/her functions in accordance with the provisions of the Act (see paragraph 65.2). Where an Insolvency Practitioner (IP) is acting and no liquidation or creditors’ committee is appointed, the Secretary of State carries out the functions of that committee (see paragraph 65.3).
Notes: [s141(5) or 302(2)]
65.2 Insolvency Practitioner’s powers and requirement for sanction (amended September 2010)
A liquidator’s powers and duties are detailed in Sections 143(1), 167, 168 and Schedule 4 to the Act whilst those for a trustee are contained in Sections 305(2), 314 and Schedule 5 of the Act. Certain powers are exercisable by the IP without recourse to the liquidation/creditor’s committee or the court, although others can only be exercised with the sanction of the committee or the court and these are listed in Schedules 4 and 5 to the Act . For example, a liquidator or trustee requires sanction to bring or defend legal proceedings.
For cases where the winding-up or bankruptcy order was before 6 April 2010, the liquidator or trustee requires sanction to exercise the power to compromise debts, calls and liabilities due to the company or bankrupt. For cases where the order was made after 6 April 2010 the requirement for sanction in these circumstances has been removed.
Where an IP employs a solicitor or disposes of any property forming part of the insolvent’s estate to a person connected with the company or an associate of the bankrupt there is no requirement to obtain the sanction of the committee but the IP must notify his/her actions to the liquidation or creditors’ committee, as appropriate. Where no such committee has been established and the Secretary of State is required to carry out the functions of the committee, such notice is not necessary.
Notes: [s167(2) or 314(2) and (6)] [R4.172(1) or 6.166(1)] [s249 or 435]
65.3 Secretary of State sanction provided by Insolvency Practitioner Unit (IPU)
Where the Secretary of State is required to carry out the functions of the liquidation or creditors’ committee, delegated authority to exercise the committees functions is held by IPU. An IP liquidator or trustee wishing to apply for sanction should be advised to send all applications directly to IPU. See also Chapter 1 paragraphs 1.28 and 1.29.
Notes: [R4.172(2) or 6.166(2)]
An application for sanction should be submitted in writing (which can include electronic form) directly to IPU using the appropriate form available via The Service’s website - http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/iparea/sanctionsforms/sanctionsforms.htm
This is made clear in the official receiver’s report to the liquidator or trustee on the handover of the estate.
Notes: [IPROH]
65.5 Content of the application
Full details of the matters that require sanction, the content of the application and further guidance for the liquidator or trustee can be found in Dear IP Millennium Edition, Chapter 7 - Creditors/liquidation committee, which is available on The Service’s website - http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/dearip/dearipmill/chapter7.htm#1.