Can You Change Liquidators in a CVL?

The liquidator is one of the key appointments when a company enters into a creditors’ voluntary liquidation (CVL). Not sure what a CVL is? We’ve written a deep dive explaining everything you need to know about CVLs here.

The liquidator is an authorised and licensed insolvency practitioner responsible for overseeing the liquidation process. Their role is to realise any available company assets and distribute the proceeds to creditors.

However, what if there are situations where creditors or members become dissatisfied with the liquidator’s performance? Can you change liquidators in a CVL?

In this article, we’ll explore the process involved in replacing a liquidator and three situations where creditors can request for a change in liquidator.

Situations for Changing the Liquidator

There can be various reasons why creditors or members may wish to change the liquidator in a CVL. The common reasons include:

Dissatisfaction with performance

The liquidator has a critical role to realise company assets and distribute the proceeds in an efficient and cost-effective manner. Confidence in a liquidator to perform their duties can be undermined if they are perceived to be inefficient, unresponsive, or worse, not acting in the best interests of creditors or members.

Conflicts of interest

Liquidators are legally required to be independent and impartial professionals. If liquidators are found to have conflicts of interests, such as undisclosed connections or relationships between the liquidator and the company, replacing them may be necessary to prevent jeopardising the integrity of the liquidation.

Lack of progress

CVLs are trying for all parties involved. Creditors and members want to see the liquidation process advance at a reasonable pace to recover losses, so long periods of inactivity, lack of communication, or a perceived lack of urgency from the liquidator can cause reasonable frustration. If the process is not progressing as expected, creditors or members may seek a change in leadership to expedite it.

Replacing the Liquidator in a CVL

The process of replacing liquidators in a CVL is governed by the Insolvency Act 1986 and the Insolvency Rules 2016. Here are the key steps:

1. Calling a meeting

The first step for this process is calling a meeting with all creditors or members (shareholders) involved depending on the party that initiated the CVL. Also, as a rule, this meeting must be called according to the established terms and all parties should receive proper notice periods.

2. Passing a resolution

To successfully remove an existing liquidator and appoint a new one, a resolution has to be passed. There are certain distinctions in this stage for a creditors’ and a members’ meeting. For a creditors’ meeting, the resolution requires a majority in value, meaning the creditors owed the most money have the biggest say. For a members’ meeting, a simple majority of those present and voting is sufficient, except in special cases where a majority of 75% is required.

3. Court approval

There are situations where the resolution to remove and replace the liquidator may require the approval of the court. Such as when the liquidator is court-appointed or there are concerns over the liquidators’ qualifications or in allegations of misconduct. When these happen, the decision to replace the liquidator might require court intervention.

4. Handover process

Upon appointment of a new liquidator, there will be a handover process where the outgoing liquidator must transfer all company records, books, and assets to the new liquidator. This transfer of tasks and responsibilities needs to be completed promptly to avoid any delays to the liquidation proceedings.

To answer the question, can you change liquidators in a CVL? Yes, if there is a good reason. It’s important to note that changing the liquidator in a CVL is not a decision to be taken lightly, as it can disrupt the liquidation process and potentially result in additional costs.

However, with legitimate concerns or issues, the ability to replace the liquidator provides a mechanism to ensure the effective and fair administration of the liquidation process.

Need advice on insolvency and CVLs? Reach out to Irwin Insolvency and our team of licensed insolvency practitioners for a free consultation.

More on CVL from Irwin Insolvency

What is a CVL

Pros and cons of CVL

CVL timeline

How much does a CVL cost

What happens to directors in a CVL

Can you remove assets before a CVL

Can you stop compulsory strike-off by CVL