Practice Fee Recovery Policy for Connect insolvency Limited
Legislation allows different fee bases to be used for different tasks within the same appointment. The basis or combination of bases set for a particular appointment are subject to approval, generally by a creditors’ committee if one is appointed by the creditors, failing which the creditors at a general meeting, or the court. Further detail about how an office holder’s fees are approved for each case type are available in a series of guides issued with Statement of Insolvency Practice 9 (SIP 9) and can be accessed atwww.connectinsolvency.com/library/. Alternatively a hard copy may be requested from Connect Insolvency Limited, 30-32 Aston House, Redburn Road, Westerhope, Newcastle upon Tyne, NE5 1NB.Once the basis of the office holder’s remuneration has been approved, a periodic report will be provided to any committee and also to each creditor. The report will provide a breakdown of the time costs incurred and remuneration drawn and will also enable the recipients to see the average rates of such costs. The report will also disclose how creditors can seek further information and challenge the basis on which the fees are calculated and the level of fees drawn in the period of the report. Once the time to challenge the office holder’s remuneration for the period reported on has elapsed, then that remuneration cannot subsequently be challenged. Further information about creditors’ rights can also be obtained by visiting the creditors’ information micro-site published by the Association of Business Recovery Professionals (R3) at http://www.creditorinsolvencyguide.co.uk/
Time cost basis
This is the basis that we use in the majority of cases using charge out rates appropriate to the skills and experience of each member of staff and the work that they perform. This is combined with the amount of time that they work on each case, recorded in 6 minute units with supporting narrative to explain the work undertaken. Time billed is subject to Value Added Tax (VAT) at the applicable rate. It is Connect Insolvency Limited’s practice to ensure that work is conducted by the appropriate staff member at the appropriate level of experience. Junior members of staff will deal with the day to day administration on cases and a manager and director then oversees the work undertaken. Where the issues are complex and litigious, the work will be closely supervised or undertaken by a senior manager or director. When members of staff of an appropriate grade are not available, the work will be undertaken by more a senior staff member who will record their time at the appropriate junior rate.
Charge out rates
These charge-out rates charged are reviewed on 1Aprileach year and are adjusted to take account of inflation and the firm’s overheads.
Current charge-out rate per hour, effective from 1 April 2017 (£)
Insolvency Practitioner/Directors = 250
Senior Manager = 210
Manager = 180
Administrator = 150
Time spent on casework is recorded in 6 minute units using a computerised time recording system under the following categories:
- Administration and planning–includes work such as planning how the case will be staffed, administered and progressed; the administrative set up of the case including preparing the documentation to effect the formalities of appointment; notifying creditors and others of the appointment; formulating, monitoring and reviewing the case strategy; keeping the records relating to the case up to date including maintaining electronic case files and case details, updating checklists, regular case reviews and case progression meetings; and reporting on progress of the case to creditors and others.
- Investigations-includes work such as corresponding with the debtor or the directors and management, reviewing questionnaires and comments provided by third parties, undertaking an initial review of the financial affairs of the company, partnership or bankrupt; establishing whether any lack of records has hindered the administration of the case and realisation of assets; whether any payments had been made to associates, any directors loans reduced and evidence of excessive remuneration drawn by the director(s); whether any major items of assets have been disposed of since the last audited accounts and whether there has been any significant reduction in stock, debtors or other assets. Also undertaking a detailed investigation with a view to making recoveries for the benefit of creditors where matters such as preferences or wrongful trading come to light as a result of the initial review; and reporting to the Insolvency Service on the conduct of the directors.
- Realisation of assets-includes work such as identifying, securing and insuring assets; liaising with agents and solicitors; dealing with sale of business, transition of contracts, property issues, disposal of stock, retention of title claims; collection of debts and realisation of other assets.
- Creditors-includes work such as making redundancies, helping employees make claims on the National Insurance Fund, dealing with employees’ queries; and liaising with the redundancy payments service; preparing creditor schedules, communicating with creditors; dealing with creditors’ claims; and where funds realised allow admitting claims and paying dividends to creditors.
- Trading-which includes work such as planning, identifying strategy, preparation of trading forecasts, monitoring of performance against the forecasts, managing operations, dealing with supplier and landlord issues to ensure continuity of operations, accounting and employees (including pensions and other staff benefits) and approving and processing all purchase orders and related documents
When we seek time costs approval we have to set out a fees estimate. That estimate acts as a cap on our time costs so that we cannot draw fees of more than the estimated time costs without further approval from those who approved our fees. When seeking approval for our fees, we will disclose the work that we intend to undertake, the hourly rates we intend to charge for each part of the work, and the time that we think each part of the work will take. We will summarise that information in an average or “blended” rate for all of the work being carried out within the estimate. We will also say whether we anticipate needing to seek approval to exceed the estimate and, if so, the reasons that we think that may be necessary. The disclosure that we make should include sufficient information about the insolvency appointment to enable you to understand how the proposed fee reflects the complexity (or otherwise) of the case, any responsibility of an exceptional kind falling on the office holder, the effectiveness with which the office holder has carried out their functions, and the value and nature of the property with which the office holder has to deal. If we subsequently need to seek authority to draw fees in excess of the estimate, we will say why we have exceeded, or are likely to exceed the estimate; any additional work undertaken, or proposed to be undertaken; the hourly rates proposed for each part of the work; and the time that the additional work is expected to take. As with the original estimate, we will say whether we anticipate needing further approval and, if so, why we think it may be necessary to seek further approval.
The legislation allows fees to be charged on a percentage of the value of the property with which the office holder has to deal. Different percentages can be used for different assets or types of assets. Where we would like to realise any asset or type of assets on a percentage basis we will provide further information explaining why we think that this basis is appropriate and ask creditors to approve the basis.
The legislation allows fees to be charged at a set amount. Different set amounts can be used for different tasks. Where we would like to charge a set amount for a task or different set amounts for different tasks we will provide further information explaining why we think that this basis is appropriate and ask creditors to approve the basis.
Members’ Voluntary Liquidations and Voluntary Arrangements
The legislation changes that took effect from 1 October 2015 did not apply to members’ voluntary liquidations (MVLs), company voluntary arrangements (CVAs) or individual voluntary arrangements (IVAs). In MVLs, the company’s members set the fee basis, often as a fixed fee. In CVAs and IVAs, the fee basis is set out in the proposals, and creditors approve the fee basis when they approve the arrangement.
The officeholder’s remuneration invoiced to the insolvent estate will be subject to VAT at the prevailing rate other than on individual and company voluntary arrangements on which generally no VAT is charged. Once the basis of the office holder’s remuneration has been approved, a periodic report will be provided to any committee and also to each creditor. The report will provide a breakdown of the remuneration drawn. If approval has been obtained for remuneration on a time costs basis, i.e. by reference to time properly spent by members of staff of the practice at our standard charge out rates, the time incurred will also be disclosed, whether drawn or not, together with the average, or “blended” rates of such costs. Under the legislation, any such report must disclose how creditors can seek further information and challenge the basis on which the fees are calculated and the level of fees drawn in the period of the report. Once the time to challenge the office holder’s remuneration for the period reported on has elapsed, then that remuneration cannot subsequently be challenged.
Agents’ costs are charged at cost based upon the charge made by the Agent instructed, the term Agent includes:
- Solicitors/Legal advisors
- Quantity surveyors
- Estate agents
- Other specialist advisors
The office holder will provide details of expenses to be incurred, or likely to be incurred, when seeking fee approval. When reporting to the committee and creditors during the course of the insolvency appointment the actual expenses incurred will be compared with the original estimate provided.
Disbursements and expenses
In accordance with SIP 9, the basis of disbursement allocation with respect to disbursements incurred by the office holder in connection with the administration of the estate must be fully disclosed to the creditors. Disbursements are categorised as either Category 1 or Category 2.Category 1 expenses are directly referable to an invoice from a third party, which is either in the name of the estate or Connect Insolvency Limited; in the case of the latter, the invoice makes reference to, and therefore can be directly attributed to, the estate. These disbursements are recoverable in full from the estate without the prior approval of creditors, either by a direct payment from the estate or, where the firm has made payment on behalf of the estate, by a recharge of the amount invoiced by the third party. Examples of Category 1 disbursements are statutory advertising, external meeting room hire, external storage, specific bond insurance and company search fees. Category 2 expenses are incurred by the firm and recharged to the estate; they are not attributed to the estate by a third party invoice and/or they may include a profit element. These disbursements are recoverable in full from the estate, subject to the basis of the disbursement charge being approved by creditors in advance. Examples of Category 2 disbursements are photocopying and mileage. In general it is Connect Insolvency Limited’s policy not to draw Category 2 disbursements (however depending upon the nature of the certain assignments, exemptions to this policy may apply).In light of the latest revisions to SIP9 and the revised definition of category 2 disbursements, please note that the firm is adopting the guidance of the IPA in this regard, in that if a category 1disbursement has been incurred and paid by the firm, any invoice raised by the firm to reimburse such disbursements will still be classified as a category 1 disbursement despite the payment being made to the firm.
(Reviewed 15 August 2022, previous version 20 August 2020)