Is it common for creditor committees to be formed in restructuring proceedings and what powers or responsibilities to they have? Are they permitted to retain advisers and, if so, how are they funded?

Restructuring & Insolvency (2nd Edition)

Hungary Small Flag Hungary

It is common to form creditor committees. Creditors may form a creditors’ committee for the protection of their interests and to provide representation, and to monitor the activities of the administrator and the liquidator. The committee shall represent the founding creditors in court and during consultations with the administrator, temporary administrator and the liquidator, and shall exercise the rights and entitlements conferred by the Insolvency Act.
Only one committee can be appointed in respect of any one economic operator in debt. In the event that more than one committee is established at an economic operator, according to the conditions set out in the Insolvency Act, the one that first notified the court of its existence shall be recognized as the creditors’ committee. If more than one committee simultaneously announces its existence, the one representing more creditors shall be considered the creditors’ committee. Other creditors may subsequently join in the operation of the creditors’ committee. Joining may not be refused if the creditors wishing to join undertake to comply with the requirements set out below.

In liquidation proceedings, a committee shall be deemed legitimate if it comprises at least one-third of the notified creditors of record, and if these creditors hold at least one-third of all claims of creditors entitled to participate in the agreement. If the number of creditors operating the committee is later reduced so that the rate of participation no longer reaches the percentage required, the committee shall cease to exist on the 30th day after the occurrence of the said circumstance, unless other creditors have joined up within the time limit, thereby reaching the required rate of participation.

The committee’s powers, representation of the creditors operating the committee, the provision of funding and the rules for the advancing and accounting of costs and expenses shall be laid down by agreement concluded by the creditors inter se. The committee shall consist of a minimum of three and a maximum of seven members; the creditors operating the committee may elect a chairperson. The committee shall inform the insolvent debtor affected, the court and the administrator or the liquidator concerning the participating creditors, the powers conferred upon the committee, of the representation of the said participating creditors within three working days of the time of its inception, with the relevant minutes and agreement attached. The committee shall adopt its rules of procedure within five working days. The rules of procedure shall govern the committee’s decision-making mechanism, as well as the procedures for requesting the opinion of the creditors operating the committee relating to the decisions and actions of the committee.

Creditors may appoint a creditors’ representative in lieu of the creditors’ committee, in accordance with the relevant provisions written above, as regards the election and rights of such representative, covering expenses, disqualification, term of mandate, notification of appointment to the court, joining the group of appointment of the representative, termination of the appointment, and the extension of the representative’s mandate in liquidation proceedings. The creditors’ representative shall carry out the duties specified in the Insolvency Act within the framework of the contract of assignment.

Indonesia Small Flag Indonesia

Although the creditor committees are regulated by IBL, it is often that no creditor committees were established in the restructuring proceedings.

In Bankruptcy Proceedings, the Commercial Court may form a temporary creditor committee consisting of 3 creditors chosen from the known creditors for the purpose of giving advice to the receiver. After the claim verification process is completed, the supervisory judge must offer the creditors to establish a permanent creditor committee. Upon the request of the unsecured creditors, based on the decision of the majority of the unsecured creditors in a creditors meeting, the supervisory judge change the temporary creditor committee (if already formed) or form a creditor committee (if has not been formed). At any time, the creditor committee is entitled to inspect all books, documents and letters regarding the bankruptcy. The receiver must disclose to the creditor committee all information being requested. If required, the receiver may meet the creditor committee for asking advice. The receiver must request the view of the creditor committee’s view before filing lawsuit, continuing ongoing court case, oppose an ongoing lawsuit. The receiver is not bound by the creditor committee’s view. If creditor committee may request the supervisory judge to issue an order regarding the view of the creditor committee which is not agreed by the receiver. The creditor committee must provide its written opinion concerning the composition plan being submitted by the debtor.

In PKPU Proceedings, the Commercial Court shall appoint a creditors committee if:

  • the petition for the PKPU covers a complex debts or numerous creditors; or
  • such appointment is desired by the creditors representing at least ½ of the total acknowledged claim.

If a creditor committee is established, the administrators must request and consider the recommendation from the creditor committee in conducting their tasks.

IBL is silent on the retention of advisers by the creditor committee and how they are funded. Nevertheless, IBL provides that the supervisory judge in both proceedings may appoint experts to conduct examination and prepare report concerning the bankruptcy / debtor’s estate condition. In PKPU proceedings, the expert’s fee shall be determined by the supervisory judge and must be paid in advance from the debtor’s estate.

Canada Small Flag Canada

The BIA provides, in a bankruptcy, for the appointment by the creditors of inspectors who will represent the interests of the creditors collectively. Inspectors are optional in the context of a BIA Proposal. It is, however, rare that a Proposal provides for the appointment of inspectors. In a bankruptcy the creditors must nominate inspectors, except in cases of “summary administration” (i.e. liquidations where the debtor is a natural person and its estate is worth less than five thousand dollars ($5000) after satisfaction of the secured creditors). Inspectors oversee the bankruptcy proceedings and must approve, among other things, the sale of most assets and, at the conclusion of the bankruptcy, the trustee’s final report and its fees.

Despite the absence of provisions pertaining specifically to the appointment of creditors’ representatives or creditor committees in proceedings under the CCAA (as opposed to Chapter 11 of the US Bankruptcy Code), Canadian Courts have on occasion ordered the creation of “creditor committees” and ordered that the legal expenses of such creditor committees to be paid by the debtor’s estate.

The Courts have also frequently appointed representatives for certain classes of creditors. The following factors are among those considered by the Courts in determining whether to order the appointment of a representative of a certain class of creditors in CCAA proceedings and whether to order a charge in their favour securing their professional fees and other costs: (i) whether the creditors in that class are vulnerable or lacking the resources necessary to obtain adequate counsel and protection in the CCAA proceedings (e.g. employees, retirees, small investors, subcontractors, etc.); (ii) whether the creditors in that class have common interests; (iii) whether the appointment would facilitate the administration of the proceeding and its efficiency; (iv) the opposition (or absence thereof) of other stakeholders; and (v) the position of the Monitor.

Germany Small Flag Germany

Appointment of creditors’ committee
After the opening of insolvency proceedings, the insolvency court may appoint a creditors' committee.

During preliminary insolvency proceedings, the insolvency court shall appoint a preliminary creditors’ committee if certain thresholds regarding the balance sheet total, sales revenues and number of employees are met.

Responsibilities of the creditors’ committee
The members of the (preliminary) creditors’ committee shall support and monitor the DIP/(preliminary) insolvency administrator’s execution of their office. They shall demand information on the progress of business affairs, have the books and business documents inspected, and verify monetary transactions and available cash. The insolvency administrator shall obtain the consent of the creditors’ committee if he or she intends to engage in transactions that are of particular importance to the insolvency proceedings, e.g., sale of the business.

The preliminary creditors’ committee has the right to be heard prior to the appointment of the insolvency administrator or monitor, and prior to the order to proceed via debtor-in-possession proceedings (Eigenverwaltung) in respect of protective shield proceedings (Schutzschirmverfahren). Furthermore, if the insolvency court rejects self-administration, the creditors’ committee can unanimously vote to overrule the court.

Retaining of external advisors
In accordance with Sec. 67 (3) Insolvency Code, non-creditor parties can be members of the creditors’ committee. Consequently, creditors can retain advisors to be members of the creditors’ committee, such as branch experts, attorneys or auditors. Apart from this scenario, it is not common for creditors’ committees to hire separate counsel.

Funding of creditors’ committee members
Each member of the creditors’ committee (including branch experts/advisors) is entitled to appropriate compensation and reimbursement of expenses, depending on the time and scope of their activity.

Both compensation and expenses are costs of the proceedings that shall be satisfied before all other claims (see Question 5 on the ranking of creditors in general).

South Africa Small Flag South Africa

Yes. In business rescue, creditors are entitled to form creditors’ committees which the practitioner would consult during the development of the rescue plan.

Committees are permitted to retain advisors, the costs of which can be considered as costs of the proceedings if dealt with as such in the rescue plan, paid in the order of priority set out in question 9.

Brazil Small Flag Brazil

The BRBL provides that is possible to be formed a committee of creditor, which will have several duties including: (i) to supervise the activities and examine the accounts of the administrator; (ii) to monitor the course of the proceedings and performance of the law; (iii) to inform the judge if it detects any violation of the rights or injury to the interests of the creditors; (iv) to verify and issue an opinion on any complaints by interested parties; (v) to request the judge to call general meetings of creditors; (vi) to pronounce in the events established in the BRBL.

Moreover, in the judicial reorganization proceeding, the committee will also: (i) supervise the management of the debtor’s activities and submit a report on his situation every thirty days; (ii) supervise the performance of the judicial reorganization plan; and submit for authorization by the judge, when the debtor is removed from the management in the events provided in the BRBL, the alienation of fixed assets, the establishment of in rem and other guarantees, as well as acts of indebtedness required for the continuation of corporate activities during the period preceding approval of the judicial reorganization plan.

The Committee may hire advisors, usually lawyers and financial advisers, in order to negotiate the best terms with the debtor and to make sure that the plan feasible. The committee’s members fees will not be defrayed by the debtor, but expenses incurred to perform any of the acts provided in the BRBL shall be reimbursed if duly evidenced and authorized by the court

Czech Republic Small Flag Czech Republic

In principle, all creditors who duly lodged their claims and whose claims were not contested by the insolvency trustee may vote at creditors’ meetings. The insolvency court may decide on a vote exemption for contested creditors. Creditors’ meetings are, among other things, authorized (i) to elect and recall the members of the creditors’ committee (the unsecured creditors elect half of the members, while the other half is elected by the secured creditors), (ii) to replace the insolvency trustee (but only at a certain stage of proceedings), and (iii) to decide on the method of insolvency proceedings (i.e., liquidation bankruptcy or reorganization). Creditors’ meetings may be called by the insolvency trustee, by the insolvency court, by the creditors’ committee or by at least two creditors whose voting rights represent more than 10% of all voting rights. Persons able to exercise control over the debtor (shadow director) and debtor’s related parties (shareholders) in principle do not have the right to vote at the Creditors’ meeting.

It is very common in insolvencies of mid-sized and large corporations that creditors’ committees are formed. A creditors’ committee may have from 3 to 7 members (as may be decided by the creditors’ meeting) and primarily plays an organizational and supervisory role. The number of members on the creditors’ committee nominated by the unsecured creditors must be at least equal to the number of members nominated by the secured creditors.

The creditors’ committee monitors the trustee’s work, approves credit financing, approves the trustee’s expenses, and inspects the debtor’s accounting and documents. In reorganization any transaction which would have a substantial impact on the operations and/or the insolvency estate may only be performed with the approval of the creditors’ committee. In liquidation, the sale of movable and immovable assets (including the sale of assets outside an auction) or the transfer of the debtor’s enterprise through a sole agreement must be approved by the creditors’ committee.

Cayman Islands Small Flag Cayman Islands

A creditors' committee may (but will not always) be established in a provisional liquidation. If the Cayman Court orders that a liquidation committee be appointed in a provisional liquidation, the composition, function and powers of the committee will be the same as a committee established in the context of an official liquidation (see below).

Under Cayman Islands law, a liquidation committee must be established in respect of every company which is being wound up by the Cayman Court unless the Cayman Court directs otherwise. The composition of that committee will be determined according to the solvency of the company. If the liquidators have determined that the company is insolvent, the committee should comprise of not less than three and no more than five creditors. If the liquidators have determined that the company is solvent, the committee should comprise of not less than three and no more than five shareholders. If the liquidators determine that the company is of doubtful solvency, the committee must comprise of not less than three and no more than six members of whom a majority must be creditors and at least one must be a shareholder. Committee members are elected at meetings of creditors and/or shareholders (as appropriate).

Liquidators are under a duty to report to the liquidation committee on matters that are of concern to it with respect to the liquidation. The committee's role is to act as a sounding board for the liquidators on issues arising in the liquidation and to also scrutinise the liquidators' fees and expenses. As such, the committee plays a key role in the conduct of the liquidation of the company.

The committee will often be asked to approve certain matters by resolution (either by majority vote at a meeting or unanimously in writing) on which the liquidators propose to seek the Cayman Court’s permission such as, for example, the disposing of company assets, obtaining litigation funding, engaging legal counsel or other professionals and payment of the liquidators’ fees and expenses. Liquidation committees have standing to make 'sanction applications' pursuant to which they would be able to apply to the Cayman Court for orders and/or directions with regard to the exercise or proposed exercise of a liquidator's powers.
The committee is entitled to engage a legal adviser, and the legal fees and expenses that the committee reasonably and properly incurs in obtaining legal advice will be paid out of the assets of the company as an expense of the liquidation.

Where a restructuring is being implemented by way of a scheme of arrangement and outside of a liquidation, it is typical for an informal ad hoc committee of creditors to be established to represent the interests of the key stakeholders in negotiations with the debtor.

Japan Small Flag Japan

It is not common for creditor committees to be formed in Japan. In both civil rehabilitation proceedings and corporate reorganisation proceedings, the court may approve the participation of a creditors committee in the proceedings if (i) the number of committee members is not less than 3 and not more than 10, (ii) it is found that the majority of creditors consent to the committee's participation in the proceedings, and (iii) it is found that the committee will properly represent the interest of creditors as a whole.

Once the participation of the creditors committee is approved, the committee may (i) state its opinions to the court, the debtor, the trustee, or the supervisor in the proceedings, (ii) request the court to order that the debtor or the trustee make a report with regard to the status of the administration of the debtor's business and property and other necessary matters, (iii) petition for the convocation of a creditors meeting.

The creditors committee may retain advisors. The necessary expenses for the creditors' committee including advisors’ fees may be reimbursed from the debtor's assets if the court finds that the creditors committee has carried out activities that contribute to ensuring the rehabilitation or the reorganization of the debtor.

Singapore Small Flag Singapore

It is common (but not obligatory) for creditor committees to be formed in both liquidation and judicial management proceedings.

In a liquidation, the committee of inspection (consisting of both creditors and contributories) has the power to approve the liquidators’ fees, and may authorize the liquidator to carry out the business of a company, pay out debts in full, or make a compromise with the company’s creditors / debtors. The committee of inspection may also authorize the liquidator to appoint a solicitor to assist him in their duties. The cost of these solicitors are usually paid out of the assets of the company.

In a judicial management, a committee of creditors may also be formed at the first meeting of creditors. The committee has the power to have the judicial manager attend before them and to furnish then with such information relating to the judicial management as they may require. In practice, a judicial manager is also likely to seek approval from the committee before making any major decisions in respect of the company. Notably, unlike the situation with a liquidator, a judicial manager does not need to obtain the approval of the committee of creditors before appointing a solicitor to assist him.

In both liquidation and judicial management, members of the committee may also appoint their own personal legal advisors, who may appear at committee meetings on their behalf. The costs of these legal advisors are borne by the creditors who appoint them.

British Virgin Islands Small Flag British Virgin Islands


Denmark Small Flag Denmark

Under Danish law creditor committees cannot be formed in restructuring proceedings only in bankruptcy proceedings. In practice, however, it is not usual that a creditor committee is formed in bankruptcy proceedings.

If a creditor committee is formed, the creditors will be permitted to be represented by an attorney. However, it is only the appointed members of the creditor committee who may be paid by the estate in bankruptcy. Expenses for the members’ own advisors will as the predominant main rule not be paid by the estate in bankruptcy.

The trustee does not require the consent of the creditor committee in order to make transactions but the trustee must inform the creditor committee prior to material decisions. Non-compliance with the duty to inform may result in a complaint from the bankruptcy court and possibly appointment of a new trustee. The creditor committee does not have the authority to make decisions.

Existing contracts and assets / business sales
How are existing contracts treated in restructuring and insolvency processes? Are the parties obliged to continue to perform their obligations? Will termination, retention of title and set-off provisions in these contracts remain enforceable? Is there any an ability for either party to disclaim the contract? What conditions apply to the sale of assets / the entire business in a restructuring or insolvency process? Does the purchaser acquire the assets “free and clear” of claims and liabilities? Can security be released without creditor consent? Is credit bidding permitted? Are pre-packaged sales possible?

• Contracts in restructuring processes
With the consent of the restructuring administrator the debtor may as a starting point continue contracts/bilateral contracts entered into. The debtor may also terminate the contracts with the consent of the restructuring administrator which is usually also the case for non-terminable contracts unless the non-terminability is secured by registration.

In restructuring proceedings, contracts are treated under the same rules as contracts in insolvency proceedings so please see the section on such contracts.

It is noted that the debtor cannot continue the contract without the consent of the other contracting party if except from the restructuring proceedings the other contracting party was entitled to terminate the contract without notice for other reasons that debtor’s delay in the contractual payment.

In restructuring proceedings, the debtor may in certain circumstances continue agreement than the other contracting party had terminated without notice no later than 4 weeks prior to the restructuring.

If the creditors approve a restructuring proposal that includes a transfer of business, the contracts may in certain cases be transferred to the buyer without the consent of the other contracting party.

• Contracts in insolvency proceedings
The insolvent estate may decide to let the insolvent estate adopt the contract or not. Consequently, it cannot be effectively agreed in advance that insolvency or restructuring proceedings means that the agreement be terminated without notice. The other contracting party may require that the insolvent estate decides on the adoption of a contract without undue delay.

If the insolvent estate does not adopt the contract, the other contracting party may as a starting point terminate the agreement without notice and claim damages for its loss suffered by the non-performance of the contract.

If the insolvent estate adopts the contract, the insolvent estate assumes the rights and obligations under the terms of the contract.

The maintenance of retention of title in restructuring and insolvency proceedings requires that the retention of title is valid prior to the commencement of the restructuring proceedings or the issue of the insolvency order. Right of set-off may as a starting point be maintained but it is governed by the Danish Insolvency Act.

If the insolvent estate adopts the contract, the other contracting party may only terminate the contract without notice if the insolvent estate is in breach of its contractual obligations unless the other contracting party could terminate without notice on the basis of the general rules of Danish law of obligations.

However, even though the insolvent estate has adopted the contract, the insolvent estate is always entitled to terminate the contract by giving a month’s notice if the contract concerns the delivery of an on-going service.

• What conditions apply to the sale of assets / the entire business in a restructuring or insolvency process? Does the purchaser acquire the assets “free and clear” of claims and liabilities? Can security be released without creditor consent? Is credit bidding permitted? Are pre-packaged sales possible?

In restructuring as well as insolvency proceedings transfer of individual assets and entire businesses may take place.

In restructuring proceedings, the entire business or part of such business is sold on the basis of a restructuring proposal made by the restructuring administrator. The proposal must be approved by the creditors.

The transfer typically takes place free of claims and liabilities but the final terms depend on the restructuring proposal.

When insolvent estates sell assets together or one by one, such assets will as the predominant main rule be transferred without any liability for the insolvent estate or the trustee and any buyer must consequently take over the asset as is.

In insolvency proceedings the trustee is not obliged to ask the creditors unless the assets transferred are charged.

If the assets are charged, the creditor must accept the transfer unless the sale is a forced sale.
If employees are transferred as part of a transfer of the entire business, the buyer takes over the employees’ employment contracts, including the terms of the employment contract and any due payments.

• Credit bidding
Credit bidding is allowed under Danish law, but it requires that the chargee outbids the other bidders in respect of the charged asset.

• Pre-packaged sales
Legislation on pre-packed sales has not been passed in Denmark.

Liabilities of directors and others
What duties and liabilities should directors and officers be mindful of when managing a distressed debtor? What are the consequences of breach of duty? Is there any scope for other parties (e.g. director, partner, shareholder, lender) to incur liability for the debts of an insolvent debtor?

The board of directors and the executive board (the ”management”) of a business that suffer from cash unavailability must pay particular attention to the so-called ”time of no avail”.

The time of no avail cannot be fixed in advance but it defines the time at which the management ought to have realised that the business could not continue operations properly without any further losses for the creditors.

If the management continues operations beyond the time of no avail, the trustee of the subsequent insolvent estate and creditors that believe that operation beyond the time of no avail has caused losses for the business and/or the creditors may at a later time raise a claim for damages against the former management.

If the business has passed the time of no avail, the management is also obliged to ensure that payment of creditors in an insolvent business takes place in a manner that complies with the ranking of creditors so that some creditors are not given preference over others.

In addition, the management must ensure that the business fulfils the general bookkeeping and tax obligations as these factors are decisive in a later assessment of any management liability.

The management may incur liability, see above, but may also be disqualified by the insolvency court if up to the insolvency the management has not fulfilled its management obligations. Disqualification means that each management member cannot participate in the management of a limited liability company without being personally liable for claims against the company.

• Is there any scope for other parties (e.g. director, partner, shareholder, lender) to incur liability for the debts of an insolvent debtor?
The executive board and shareholders may incur liability if decisions made results in losses for the company or a third party. The executive must have acted intentionally or negligently in order to incur liability for the loss that the decisions have caused the company or a third party.

The assessment of liability is more severe in case of shareholders as the shareholder must have acted with gross negligence in order for him to incur liability for the loss that the company, other shareholders or a third party has suffered. This is consequently an exception to the rule that as a starting point the shareholder cannot incur liability.

China Small Flag China

The formation of a creditor committee is subject to vote by the creditors’ meeting. In practice, it is normally the administrator who proposes whether or not to set up a creditor committee, and the administrator’s role in the formation and composition of a creditor committee is crucial. A creditor committee is not a must in restructuring, and it is usually formed in large and complicated restructuring cases. The Enterprise Bankruptcy Law has laid down in detail the powers of a creditor committee, for example, monitoring the management, disposal and distribution of the debtor’s assets, proposing to hold meetings of creditors, and exercising other powers granted by the creditors’ meeting. In addition, the law also requires that an administrator shall promptly report to the creditor committee if it disposes of the debtor’s assets in a way prescribed by the law and having a significant impact on the interests of the creditor.

There are no words in the law as to retainment of advisers by creditor committees. Advisor’s fees may not be paid out of bankrupt assets. Creditor committees or creditors may hire advisors at their own discretion and expense.

Australia Small Flag Australia

Committees in the Australian insolvency regime are creatures of statute and are not seen in the context of representing creditor stakeholder groups as they might in other jurisdictions such as the United States. In this context, committees are fairly common in Australia, particularly in large liquidations (where they are most often used) where it is difficult for the liquidator to engage with the entire body of creditors on a regular basis.

The role of the creditor committee is to supervise and assist the liquidator. Examples of the type of direction the committee may make include approving the remuneration of the liquidator, approving the institution of legal proceedings on behalf of the company and directions as to the compromise of debts owing to the company. Members of the committee owe the general body of creditors and members fiduciary duties and therefore must act in the best interests of the creditors and members rather than for their own benefit.

It is very rare for a committee of inspection to retain advisors or their own Counsel.

Committees can also be formed in administrations and in respect of companies subject to a DOCA. They exist to consult.

Belgium Small Flag Belgium

No, Belgian law does not know the concept of creditor committees in restructuring proceedings.

The Netherlands Small Flag The Netherlands

A creditors’ committee is not very common in Dutch bankruptcies. Under Dutch law, a bankruptcy court may, in the bankruptcy order or in a later order, appoint a provisional committee (voorlopige commissie) of between one and three creditors in order to advise the bankruptcy trustee. The court may appoint such provisional committee, if justified by the importance or the nature of the estate and as long as no definitive committee (definitieve commissie) has been appointed. Whether or not there will be a definitive committee is to be decided by the creditors during the verification meeting.

A creditors’ committee may require inspecting the books and documents relating to the bankruptcy at any time (i.e. a right to information). A creditors’ committee may at all times and at its own discretion advise the bankruptcy trustee on the course of action of the bankruptcy proceeding. Furthermore, a creditors’ committee is obliged to submit an advice under the following circumstances: (i) a proposed composition plan (faillissementsakkoord) or (ii) a proposed continuation of the business.

Dutch law does not provide for specific provisions as regards retaining advisers or funding of the expenditures.

United States Small Flag United States

In chapter 11 cases, the U.S. Trustee is generally required to appoint a committee of unsecured creditors and has the authority to appoint other committees if it sees fit, though this requirement is not often observed in “pre-packaged plan” cases. The official creditor’s committee is generally comprised of five to seven creditors, selected from the debtor’s 20 largest creditors. This committee serves as a fiduciary for the unsecured creditors and performs oversight functions such asinvestigating the debtor’s acts, conduct, assets, liabilities and other matters of relevance to the development of the plan. If the court approves, the committee may retain legal and financial counsel, with those expenses paid from the debtor’s estate. Unofficial or ad-hoc committees are also often formed in restructuring proceedings, but they are self-appointed and self-regulating. While these committees often retain legal and financial counsel as well, the debtor is not necessarily required to pay their expenses. However, if the court finds that the ad-hoc committee made a “substantial contribution” to the case, the debtor may be required to pay their expenses as well.

France Small Flag France

Creditor committees are formed in order to adopt the safeguard (or restructuring) plan for companies whose annual turnover is superior to €20M or whose number of employees is superior to 150 or upon request of the debtor for smaller companies. Creditor committees are of 2 types: committee of the main suppliers and committee of credit institutions. The bondholders if any are also grouped into a single assembly to be consulted on the plan. Unlike creditors' committees, the bondholders cannot propose an alternative plan.
They are permitted to retain advisers but only at their own expense.

Luxembourg Small Flag Luxembourg

Under the law of 30 June 1930 on the creation of creditors’ committee for the safeguard of creditors’ interests during bankruptcy and composition with creditors (“concordat préventif de faillite”), the supervisory judge may appoint a creditors’ committee.

The creditors’ committee however merely assists the receiver and has a strictly advisory nature. Specific rules apply to the appointment and dismissal of committee’s members, who are remunerated for their services.

The institution is very rarely used in practice and not comparable to the UK and US creditors’ committees in their nature, function and powers.

New Zealand Small Flag New Zealand

Creditors in a voluntary administration may resolve at the first creditors meeting to form a creditors committee. The function of such a committee is to consult with the administrator about matters relating to the administration and to receive and consider reports by the administrator. Only creditors or their agents may be members of the committee. Such a committee has no standing to give directions to or control the administrator and the power to require administrator reports is intended to ensure disclosure by the administrator of all matters relevant to the administration. The power to receive reports is not a power to control the administrator's investigations or a power to require the administrator to seek the opinion of third parties on matters respecting which the administrator has a duty to form an opinion.

The formation of creditors committees is not unusual in large New Zealand voluntary administration cases. Such committees and their members are free to seek advice as they see fit, however no provision is made in the laws of New Zealand for the funding of the cost of any such advice or advisors.

Romania Small Flag Romania

In most of the insolvency proceedings a creditors’ committee formed of 3 or 5 creditors is appointed, with a structure that would be representative for as many classes of creditors as possible. The powers and duties of the creditors’ committee are the following: i) to analyse the debtor’s situation and to make recommendations to the creditors’ meeting with regard to the continuation of the debtor’s activity and to the proposed reorganization plans; ii) to negotiate the appointment conditions with the official receiver or with the judicial liquidator who wants to be appointed by the creditors in the file; iii) to take note of the reports prepared by the official receiver or by the judicial liquidator, to analyse them and, if the case, to challenge them iv) to prepare reports, which to present to the creditors’ meeting regarding the measures taken by the official receiver or by the judicial liquidator and their effects and to propose, justifiably, also other measures; v) to request the lifting of the debtor’s right of administration; vi) to introduce claims for the annulment of fraudulent deeds or operations to the creditors’ detriment, if such claims have not been filed by the official receiver or by the judicial liquidator. Usually, the creditors’ committee does not appoint its own advisors, but this may appoint them with the consent of the creditors’ committee.

Switzerland Small Flag Switzerland

Following a recent amendment to the DEBA, it is now possible for a creditor committee to be formed during a composition moratorium. In practice, however, it is rare that in a moratorium a creditor committee is formed. This may change once practitioners become more familiar with this new possibility. If established, the main duties of a creditor committee in moratorium proceedings are to supervise the administrator and to approve (in place of the composition court), inter alia, the sale of assets and the posting of new collateral (cf. section 12 below). If restructuring is achieved through a composition agreement with assignment of assets (cf. section 8 above), a creditor committee is mandatory.

Members of the creditor committee are compensated. Such compensation is usually calculated on a time-spent basis and paid out with priority. The members of the committee are often advisers who act for one or more creditors.

There is no legal basis for a creditor committee to retain advisers and absent a highly complex fact pattern we would not expect a composition court to grant such request. It is, however, possible for the administrator to retain advisers and share their findings with the creditor committee.

Israel Small Flag Israel

It is not common for different types of creditors to form creditors' committees.

However, it is very common that Israeli traded bondholders from one or more series of bonds forms a representative body, which includes representatives of three or four of the major bondholders, or a professional representative chosen by the majority of the bondholders.

The representative body is considered as an advisor of the Bondholders Trustee who is nominated according to the Securities Law 1968. The representative body, together with the Trustee, usually handles the negotiations with the company and the investor/controlling shareholder and is capable of providing an initial insight or guidelines as to the terms agreeable by the bondholders.

As all powers of the bondholders are asserted to the Bondholders Trustee, the Israeli law does not set any provisions regarding the power or responsibilities of the representative body, but the establishment, treatment of information, conflict of interest etc. of the representative body are regulated by the Israeli Securities Authority guidelines and instructions.

The representative body generally retains financial and legal advisors, the costs of which are born by the company, either by virtue of the deed of trust allowing the bond trustee to engage consultants of the company's expense, or by virtue of a separate commitment, which some companies undertake upon commencement of negotiations with the bondholders. To the extent the company did not borne such expenses there is usually an indemnification rights towards the bondholders.

In addition to the possible representative body, Israeli Companies Law demands that court will nominate an expert to escrow debt arrangement process that involve public traded bonds. The expert furnishes his professional opinion to the bondholders and other creditors, with respect to the fairness of the suggested arrangement, comparison to possible outcome of liquidation process and to possible legal proceedings against controlling shareholders, directors and officers.

The new Insolvency Law introduces the concept of a creditors committee the court is entitled to appoint, comprising of different types of creditors other than the unsecured creditors. The creditors committee may present its position in different matters, but does not have a decisive role.

Bermuda Small Flag Bermuda

It is common for a restructuring to involve a creditors’ committee (if appointed) or at the very least an informal committee of creditor representatives.

Expenses incurred by the creditors’ committee may be reimbursed but members of the committee cannot be paid for their time spent.

Ireland Small Flag Ireland


The examiner may also convene a committee of inspection to act as a forum for creditors to voice their views on the conduct of the proceedings. Committee members are entitled to be independently advised and their out of pocket expenses will be discharged from as costs of the examinership.


A committee of inspection is a group of people who represent the interests of creditors in a creditors ‘voluntary winding up or a compulsory winding up. Its main role is to oversee the activities of the liquidator and protect the rights of creditors. The committee can be comprised of up to 5 creditors and 3 members provided that there are no more than 8 members and no less than 2. The core duties of the committee are to approve the liquidator’s fees and expenses, call meeting to discuss concerns about the liquidation, approve payments to certain creditors or agree a compromise with creditors and decide whether or not the powers of the company’s directors should continue during the course of the liquidation. Members of the committee of inspection are not paid for their work but are entitled to expenses necessarily incurred, as costs of the liquidation.


The Companies Act does not provide for the formation of creditor committees in a receivership.

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Since the financial crisis of 2007-2008, we have seen a rise in ad hoc creditor committees over formal co-ordination or steering committees. Ad hoc committees are self-formed groups of creditors that will coordinate among themselves and the debtor on the implementation of the workout. Although the size of these groups can vary (from a minority ad hoc committee to one that holds substantial all the liabilities of a debtor), the crucial difference between an ad hoc committee and a more formal coordination or steering committee is that the former may act unilaterally, and is not necessarily representative of the wider stakeholder classes. Within this reduced scope, ad hoc committees can often act more quickly and more flexibly (but may only speak for one part of the capital structure).

An ad hoc committee will usually need to engage legal and financial advisers. It is a market custom (and often required in bank facility documentation) that the debtor pays the costs of creditors in connection with an event of default or in connection with any protection or enforcement of the security. This is usually memoralised in any waiver or new documentation entered into with the debtor for the workout.

Mexico Small Flag Mexico

There are no creditor committees contemplated by the Insolvency Law. However, the Insolvency Law provides that any creditor or group of creditors representing at least 10% of (i) all outstanding indebtedness included in the preliminary Creditor´s List or (ii) all Recognized Creditors, are entitled to designate a creditor´s supervisor (interventor; the “Creditor´s Supervisor”) to supervise the acts of the Mediator, the Receiver and the insolvent entity in the administration of its business during the Insolvency Proceeding. The Creditor´s Supervisor shall have the following authorities:

(a) Request the notification and publication of the Insolvency Judgement.

(b) Request the insolvent entity, the Mediator or the Receiver access to accounting records of the insolvent entity, with respect to any matter that could impact or affect creditor´s interests.

(c) Request the insolvent entity, the Mediator or the Receiver written information on matters related to the management of the insolvency estate that could impact or affect creditor´s interests, including periodic reports presented by the Mediator and the Receiver.

(d) Act as intermediary between the creditor´s that designated him/her (or other creditors if so requested by them) and the insolvent entity, the Mediator and the Receiver.

(e) Other authorities, as provided by the Insolvency Law.

Spain Small Flag Spain

The SIA does not regulate the formation of a creditor committees.

Existing contracts and assets / business sales

The DIP cannot be a cause to terminate a contract (art. 61.3 SIA).

The contract with pending obligations for both parties shall be in force after the DIP. Likewise, the contracts where at the moment of the DIP, one of the parties had entirely fulfilled his obligations while the obligations of the others party is pending, the debtor’s credit shall be included in the aggregate assets or liabilities of the insolvency proceeding (art. 61.1 SIA).

Even if there are causes to terminate the contract, the court could decide not to terminate the contract in interest of the insolvency proceeding (art. 62.1 and 61.3 SIA).

On the other hand, the labor contracts and contracts with public administration are regulated by others specific rules (art. 64, 65, 66 and 67 SIA).

The SIA only allows the set off if previously to the DIP, the credit fulfills the requirements that establish the article 1196 of SCC (art. 58 SIA):

  • Both subject has to accomplish with the obligation and the parts mutually are debtor-creditor.
  • Both debts consist of an amount of money, or if it consist of a consumable asset, it has to be of the same sort and quality.
  • Both debts has to be matured, liquid and enforceable.
  • Both debts are not retained.

Regarding the retention right, once the insolvency proceeding is initiated, the exercise of retention on assets and the right of integration in the debtor’s estate shall be suspended. If at the conclusion of the proceeding, such assets or rights have not been disposed of, they shall be immediately be returned to the holder of the retention right whose claim has not been fully settled (art. 59 SIA).

The assets that integrate the debtor’s estate shall be liquidated according to the rules established by the liquidation plan. Notwithstanding, the assets that are considered as merchandise could be sold during all the development of the proceeding in the course of the regular business activity of the company (art. 148 and sequence SIA). If the IA wants to sale any other assets than merchandise assets outside the liquidate phase, it will be necessary to apply to court for an authorization (art. 43 SIA).

Regarding the sale of the entire business, it could be done in any phase of the insolvency proceeding. However, in the liquidate plan shall contain the requirements that have to accomplished the offer to propose to sale the entire business. In any case, the proposal has to be in written and shall include viability plan (art. 100 and 146 bis SIA).

All hoisting of the foreclosure has to be authorized by the creditors. However, in a Spanish insolvency proceedings the unique seizure that could be lifted are the tax foreclosure in case when the maintenance severely hinders continuity of the business activity (art. 55.3 SIA).

According to the SCC (art. 1525 and subsequent), it is allowed to credit bidding. Once the credit has been sold, the new creditor shall subrogate in the position that occupied the previous creditor. As for the pre-packaged sales, the Spanish legal system does not regulate pre-packaged sales.

Liabilities of directors and others

As we have indicated in question number 3, when the debtor is insolvent (when he considers that is not able/ will not be able to fulfill regular and punctually his enforceable obligations art.2 SIA) directors or boards of directors must apply for the DIP within the two months following the date of having known, or should have known his state of insolvency (art. 5 SIA). Furthermore, shareholders, partners, members or parties who are personally liable for the debtors are also entitled to apply for the DIP (art. 3 SIA).

In case that the directors or boards of directors do not apply for the DIP could be qualified, in the qualification phase, as a tortious (art. 164 y 165 SIA). Consequently, the sentence of classification of the insolvency proceeding will determine the persons affected by the classification. These persons could be condemned to the prohibition to administrate the assets of others for a period of two to fifteen years, as well as to act on behalf to any person during the same period (art. 172.2.2 SIA). Moreover, directors or boards of directors could be condemned to pay totally o partially the credits that have not been satisfied by the liquidation of the assets (art. 171.2.3 SIA).

Portugal Small Flag Portugal

No. Creditor committees are only common in insolvency proceedings, where their main powers are to supervise the activity of the insolvency administrator and to cooperate with him. They can retain advisers, if they so wish, which will generally be paid by the party that requested their services.

Updated: July 9, 2018