Committees – a short cut to agreeing remuneration?

Continuing the trawl through the new rules on Committees, it seems that the Insolvency Service have created a route by which to get a committee of your own nominees rather than rely on a vote by creditors. Because of the obvious ethical risks, some suggest that this is just an example of another cock-up in the drafting. But I think this could be a very useful means of getting Committees appointed in difficult or speculative cases, to avoid repeated applications to creditors for fee changes and the like.  Who knows – the Insolvency Service may even have decided it can trust us to be the professionals that the vast majority of us really are.

In summary, the new rules[1] seem to allow one to decide to have a committee and then establish it (the new expression for “constitute”) by the deemed consent process. Because of the obvious room for conflict in appointing a committee entirely made up of one’s own nominees, one would have thought that the new SIP 15 would have something to say about it, but no.

But until such time as a new SIP does appear or the Insolvency service amend the provision, here is some guidance on how you might think about using it –

  • If you think you should have a committee, seek out the creditors you believe most likely to serve and get their agreement, beforehand.
  • Conduct a check under the ethical code, to ensure that there are no self-interest or familiarity risks arising (e.g. you act regularly for that creditor in some other capacity, or they (or their representatives) are already acting on other committees where you are office holder).
  • Make sure the decision is justified by a clear note as to the reasons why you want a committee and why those particular creditors are being nominated.
  • Give notice that you will deal with the matter by deemed consent, and state that unless other nominations are made, the persons you have nominated will be its members.
  • You will also have to make provision in your notice for creditors to either object to the committee altogether or submit their own nominations in the period allowed. If you get more than five nominations altogether including your own, you will then have to either put the nominations up for a decision by meeting or perhaps invite (some of) your own nominees to stand down.
  • Make a clear record of the final process of appointing the committee, including any decision to keep one of the original nominees, rather than one from elsewhere.
  • Summarise that rationale in your letter to creditors and make sure the process of choosing committee members is made clear.
  • Be prepared for your RPB reviewer to give any fees decided by the committee, special attention.

There are other things about the processes of dealing with committees and remuneration that you will need to be aware of – this is not a one-stop solution to all the problems created by the fee proposal requirements. I hope to get out a general guidance paper on committees in due course, but for the moment I shall be interested to see what readers make of this.

[1] For those of you who are technically minded, read the new section 246ZF(4) from the SBEE in conjunction with new Rules 17.5, 3.39, 6.19 and 10.76.


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