Remuneration of liquidator

The liquidator normally gets the remuneration in the form of commission which is usually based as a percentage on the value of assets realized and amount paid to unsecured creditors. In calculating the liquidator’s remuneration, the following points may be noted:

(a) On assets realized: The term ‘assets realized’ does not include cash and bank balances as the liquidator does not realize cash and bank balances. However, in some cases cash and bank balances are given in the list of assets realized by the liquidator, then the remuneration has to be calculated even on cash and bank balances.

Some assets are given as security to secured creditors. If the assets given as security are sold by the liquidator he will get remuneration on the securities sold by him. If the securities are sold by the creditors and the surplus after deducting the amount due to them is given to the liquidator, then remuneration is given to the liquidator on such surplus from securities.

(b) On amount paid to unsecured creditors: Unless otherwise stated, for the purpose of calculating liquidator’s remuneration, the term unsecured creditors includes preferential creditors as basically they are also unsecured creditors.

The Commission is calculated as follows:

(i) If the amount available is sufficient to pay unsecured creditors = Preferential Creditors + Unsecured Creditors × Rate/100.

(ii) If the amount available is insufficient to pay Unsecured Creditors in full = Amount available × Rate/100 + Rate.

1. Percentage on Assets Realized

Here, assets realized means the amount collected from the realization of fixed assets, current assets and other assets, other than fictitious assets. The cash and bank balance should not be included in total assets for the calculation of remuneration. But in the question, if the cash and bank balance are given in the list of assets, then cash and bank balance should be included in the total assets for the calculation of remuneration.

In the case of collateral securities depositing against secured creditors, if nothing is mentioned in the question, the total assets should include the full amount of collateral securities for the computation if remuneration. But if the securities are realized by creditors and only the surplus sent to the liquidator, then total assets should include only surplus amount realized from collateral securities. Thus, the liquidator’s remuneration is calculated as mentioned below:

Liquidator’s Remuneration= Assets realized X Remuneration Percent/100

2. Percentage on Amount Distributed To Unsecured Creditors

Sometimes, the liquidator also receives commission on the amount distributed to unsecured creditors. For the computation of the commission, firstly the amount available for payment or surplus must be ascertained in the following way:

Amount available for payment = Total receipts – Total payment (up to the payment made to debenture holders)

Then amount available may or may not be sufficient for the payment of unsecured creditors amount. If the amount is sufficient, the commission is calculated as follows:

Commission = Unsecured creditors X Commission rate/100

If the amount available is not sufficient for the payment of unsecured creditors, the commission will be determined as follows:

Commission = Amount available X Commission rate/100+ Commission rate

3. Percentage on Amount Distributed to Equity Shareholders

For the calculation of this commission, firstly the amount available for equity shareholders should be ascertained. For finding out the amount available for equity share holders, the following equation can be used:

Amount available = Total receipt – Total Payment ( up to the payment made to preference shareholders)

If the amount available is sufficient for the payment of equity share capital amount:

Commission = Equity share capital amount X Commission rate/100

If the amount available is not sufficient:

Commission = Amount available X Commission rate/100+ Commission rate