PROPOSAL FOR CHANGES TO THE INSOLVENCY (ENGLAND AND WALES) RULES 2016 RELATING TO FEES FOR CVL LIQUIDATORS
R3 has prepared a detailed proposal to The Insolvency Service for crucial changes to the Insolvency (England and Wales) Rules 2016 (IR16). This initiative focuses specifically on addressing the challenges Liquidators face in obtaining reasonable remuneration in Creditors' Voluntary Liquidations (CVLs).
The Problem: Creditor Apathy and Unnecessary Costs
The current framework poses growing difficulties for Insolvency Practitioners (IPs), particularly those in smaller practices, due to pervasive creditor apathy regarding remuneration requests.
IPs frequently encounter situations, especially in smaller cases with minimal available funds, where creditors are unwilling to actively vote on fees. This lack of engagement often forces Liquidators to seek fee approval via a costly and time-consuming court application.This process depletes already limited funds, representing "money and time not well spent" that could be better utilised for the benefit of the estate.
The principles of remuneration within IR16 state that an office-holder is entitled to receive remuneration for their services. It is therefore reasonable to establish a platform where IPs can obtain their due remuneration without incurring unnecessary costs.
The Solution: Introducing a Statutory Fee for CVLs
To resolve the issues faced by IPs, members of R3's General Technical Committee (GTC) propose the introduction of a Statutory Fee for Liquidators of a CVL.
- Initial Amount: This fee would initially be set at £10,000 (plus VAT), subject to future adjustments by the Secretary of State.
- Purpose: The £10,000 is designed to cover the essential, foundational work carried out in every standard CVL case.
- Benefits: This approach will significantly streamline the fee approval process, drastically reduce the need for expensive court applications (thereby reducing court work), and bring affected cases to more timely conclusions.
The proposal is designed to simplify processes and reduce the administrative burden. While this introduces an element of an automatic fee, it preserves existing creditor and IP rights:
- The Liquidator can still seek a change in the basis of their remuneration via IR16.
- Creditors retain the right to challenge the fee under existing rules (r18.34} of IR16).
Other Key Proposed Amendments to IR16
The proposal includes additional changes to IR16 to simplify processes and reduce administrative burdens:
- Part Two: Removes the 18-month deadline for an administrator or liquidator to apply to court to fix the basis of their fees (r18.23(3) of IR16).
- Part Three: Removes the "material and substantial change in circumstances" requirement to alter fee arrangements, allowing adjustments to the actual rate or amount of fees, not just the calculation method.
- Part Four: Proposes consequential amendments to IR16 necessary due to the introduction of the prescribed Statutory Fee.
Platforms
The vision of this proposal was Michelle Butler, who was fortunate to have the assistance and constructive criticism of others in reviewing the proposal, all giving up their time for free, to help the profession. In this regard we would especially like to thank Stephen Hill, Julie Kinnison, Robert Horton and Rosalind Hilton. All of whom are members of the GTC. We also like to thank those members of GTC who reviewed and provided comment on the working group’s final version of the proposal.
