The basis of the fees for insolvency practitioners in these types of cases are usually based upon the estimated time to be spent on a matter at a schedule of chargeout rates or as a percentage of realisations into the case. Any fee basis is generally subject to agreement by creditors.
Insolvent Liquidation & Administrations
The most common method of charging is by reference to “time spent” on a case. If this is the proposed fee basis then, in most cases, a report will be sent to creditors detailing the hourly chargeout rates of each member of staff who will be dealing with the case, as well as an estimate of the likely total cost for the particular matter. It is then for the creditors to agree with the fee proposal. If a practitioner proposes to charge by reference to a percentage of realisations, then they will again need the consent of creditors. They will have to report to them outlining the estimated realisation levels as well as the proposed percentage to be charged so that creditors can understand what this will cost them. Fees cannot be drawn from asset realisations in either scenario without a simple majority of the creditors (more than 50% in value of those that vote) agreeing to the proposal. In all scenarios a Practitioner is expected to be completely transparent in relation to fees at all times. Creditors are entitled to request further information in relation to the level of fees if they believe such transparency is not being provided.
Members Voluntary Liquidation (MVL)
An MVL is a solvent liquidation and is usually appropriate when a business reaches its natural end, has paid its debts off in full and the shareholders want a tax efficient method of extracting the remaining cash reserves. In this type of situation it will be for the practitioner and the shareholders to agree a fee for the practitioner to act as liquidator. The level of the fee should be documented within the engagement letter and usually provides that no further fees above the agreed limit can be drawn, unless further consent given by the shareholders. Such consent is only usually requested when matters are raised that are not known at the time of the liquidation.
Contact The Insolvency Experts
If you require any further information on fees or any other advice on your business please get in touch with The Insolvency Experts. Contact us online or call our team directly on 0300 303 8284 if you need expert debt advice.