Creditors’ rights to choose or replace an insolvency practitioner

When creditors represent at least 25% of the debts in value of a company, they can instigate the replacement of an IP in an insolvency process and in turn achieve significant time and cost efficiencies, without the involvement of the court.  

Why replace a liquidator? 

There are a wide range of reasons a creditor may want a particular liquidator appointed, including ensuring creditors have an IP with whom they can have a working, engaged relationship, and where there is independence from any real or perceived conflicts. Common examples in which we are approached to consider replacement appointments are: 

• A voluntary liquidation can be enacted at relatively short notice, where creditors may not have had the opportunity to consider the appointment or may not have had notice of the process 
• Loss of creditor confidence in a liquidator, whether through lack of progress, poor communication, insufficient ability, experience or willingness to investigate and pursue litigation, particularly where this requires a contingent investment of time 
• Creditors’ desire for a liquidator independent of the directors (the director who approaches an IP and the shareholder who formally vote to liquidate and appoint a liquidator, are, in owner-managed companies, often the same person).  
• Desire for an independent review carried out of a particular matter or of an action taken (or not taken) by an IP 
• Creditors taking steps to seek the appointment of an additional liquidator to act alongside an existing officeholder, where a specialist skill or experience is required, in the case of a conflict of interest existing 
  
  

Effecting a change of officeholder 

In a creditors’ voluntary liquidation (CVL), a liquidator is appointed initially by the shareholders. Creditors have the opportunity to choose their own liquidator but must proactively do so, absent which the shareholders’ choice remains in situ. A simple majority (>50% in value) of creditors voting is sufficient to appoint a liquidator.  

A compulsory liquidation (CL) is initiated typically by a creditor (rather than the directors/shareholder in a CVL) who is owed money and is effected by the court making a winding up order. The Official Receiver (OR), part of the government’s Insolvency Service, is automatically appointed as liquidator upon the winding up order. The OR can be replaced as liquidator at the request of creditors, with a simple majority of creditors voting in favour of a particular IP. 

During both a CVL and a CL process, creditors representing at least 25% of the value of creditors can seek to replace a liquidator by requesting the incumbent liquidator initiate a decision procedure for their removal and replacement, which is effected by a simple majority in favour.  

No court involvement is ordinarily required (unless the incumbent IP was appointed by the court) and, accordingly, this represents an inexpensive and fast route for creditors. In all cases, the court retains jurisdiction to remove/replace insolvency practitioners and in the recent case of Rawbank SA v Banfield & Ors [2025] EWHC 3054 (Ch), it approved the appointment of two liquidators from Grant Thornton, alongside incumbent liquidators from PwC, to carry out a specific purpose/role and do so independently. 

Provisions similarly exist for replacing a trustee in bankruptcy, and an administrator of a company. It is common in the latter case to see creditors seek to make provision for, at the conclusion of the administration, a liquidator independent of the administrator or their firm to be appointed to consider investigations, any legal claims and/or review any transactions undertaken by the administrators. 

Summary 

Creditors proactively engaging at the earliest opportunity is encouraged. Where there is delay, creditors often find the window to effect a change and/or influence the insolvency process has significantly narrowed. 

When choosing or replacing a liquidator (or other IP), consideration should be given to the following: 

• Early engagement with the liquidator, drawing any specific concerns to their attention 
• Ensuring sufficient creditor support to initiate and pass the relevant appointment processes 
• Ability to satisfy the (typically small) costs of the incumbent liquidator instigating a replacement process 
• Ability to articulate the reasons for a replacement, particularly if the court’s assistance may be required 
• Early engagement with the proposed incoming liquidator as to the circumstances and what can be achieved 
• How costs will be met, including costs of the respective outgoing and incoming liquidator 
• Any other factors or mitigations required, for example, is there potential for duplication of costs with a replacement or additional liquidator? 

For more insight and guidance or to discuss specific circumstances get in touch with Russ Parkin or Christopher Jones. 

Russ Parkin is a Partner and licensed Insolvency Practitioner and qualified accountant, leading Grant Thornton UK’s insolvency and asset recovery team across Leeds and Manchester, and with more than two decades of experience, Russ specialises in complex corporate and personal insolvencies, fraud investigations, pursuing legal claims, asset tracing, and enforcement of judgments and awards. 

Christopher Jones is Director and licensed Insolvency Practitioner and qualified accountant based in the firm’s Manchester office. His practice sees him investigating, formulating and managing fraud and civil claims in an insolvency context.