Upfront Fees for Insolvency Process to be Established From October 2015
By FA Simms
Business Minister Jo Swinson announced on the 3rd March 2015 that Insolvency Practitioners will be required to provide upfront fee estimates of a completed insolvency case from October 2015.
In July 2013 a review was conducted in regards to Insolvency Practitioner fees by Elaine Kempson which highlighted concerns in regards to the charges made by Insolvency Practitioners that included both remuneration and expenses. The review highlighted that it will look into predominantly the impact it has on the position of unsecured creditors and personal debtors.
Following this 2013 review and a market study from The Office of Fair Trading in 2010, Business Minister Jenny Willott launched a consultation on the proposals in 2014; aimed at tackling the issues identified in both of these studies. The main conclusion from this 2014 consultation was that creditors wanted meaningful information at the beginning of the process to increase transparency, and to address shortcomings in the current regime.
The result of all of this work saw new rules created in Parliament on the 3rd March 2015 which will require Insolvency Practitioners to provide a summary of all the estimated costs within an insolvency process and the work that will be under-taken at the beginning of an appointment. It is proposed that introducing this system will cap the fees that an Insolvency Practitioner can charge for a case and will stop any un-expected increase in fees.
The only way to change the fee proposed under the new rules will be an agreement made between the Insolvency Practitioner and the creditors.
Business Minister Jo Swinson said: “Increased transparency is a sensible and practical way to strengthen the hands of those owed money in insolvency and will give insolvency practitioners the opportunity to demonstrate how their services provide value for money.”
Giles Frampton R3 President said: “We are very pleased with the Government’s practical proposals for updating the insolvency fee-setting process. An up-front estimate should work for both creditors and the insolvency profession, and will help improve trust and transparency in our insolvency regime.”
The new rules are supported by both representatives of groups of creditors and Insolvency Practitioners who have all mentioned they see the benefit of increased transparency surrounding fees.
Published March 2015