We
are occasionally asked if an IP can be remunerated for pre-appointment work
undertaken in bankruptcies and compulsory liquidations? The answer is no, since at that stage the IP
is not in office as trustee/liquidator and the legislation contains no provision
for pre-appointment fees in bankruptcies and compulsory liquidation. The only
exception to this would be if you could persuade the Official Receiver to
instruct you to act on their behalf whilst they are still the office holder. Being realistic though, that is extremely
unlikely. In the event that you do manage
to persuade the OR, then your fees and expenses would fall within the
definition of allowable expenses under rule 6.224(1)(a) or (b) and rule
4.218(3)(a) or (b). The instructions
from the OR should be in writing (or by email), setting out what work they
require you to undertake, and the basis of your remuneration. Even if you are appointed trustee/liquidator
the fee note for such work should be submitted to the OR for approval, both
since you were instructed by the OR and to avoid the significant self-interest
threat in agreeing your own fees.
In
Secretary of State appointment cases then other than where it is an urgent
appointment there can be a significant delay between being offered the case by
the OR and actually being appointed by the Secretary of State. In the interim there is still work that you
need to undertake pre-appointment in order to fulfil your professional
obligations. For instance, you should undertake
a money laundering risk assessment and an ethical check when you are first
approached by the OR about a case. It
would also depend on your own internal procedures as to whether or not you set
up the case on your case management system prior to being formally
appointed. Such work clearly needs to be
recorded by staff in their time records, but if practice policy is to allocate
it against the specific case rather than treat is as a practice overhead, then
you should ideally have a separate pre-appointment code for such work. You should, in any event write off the
pre-appointment time on appointment to ensure that it is not inadvertently
drawn as remuneration.
Apart
from taking the initial steps mentioned above you should wait until you have a
copy of the certificate of appointment and winding up/bankruptcy order in your
hands before taking any other action. It
is not unknown for the OR to get it wrong and you need to make sure that you
have been properly appointed and have details of the company/individual over
which you have been appointed before taking action. This is particularly true if you closing down
a business, since it would be you that would be liable for conversion if you
did so without having authority to do so, or if you closed down the wrong
business.
Whilst
you need to wait until you have the documentation in your hands before taking
action, you will be criticised by the monitors if there is too much of a delay
between the date of appointment and notifying creditors of your appointment,
and also gazetting your appointment in compulsory liquidations. As a result, we recommend that if the
handover documentation has not been received say 7/10 days after you were
offered the case by the OR, then you should email the OR and ask for a copy of
the certificate of appointment, the winding up/bankruptcy order, the OR’s
report to creditors and a list of creditors to be emailed or faxed across to
you. That way you can then get on with
your actions as office holder without delay, or at least be able to evidence to
your regulator that you have tried to do so if the OR does not provide the information.
We say email rather than phone the OR,
as you can then keep a copy of that email, together with the OR‘s response. as a
form of defence if you are subsequently criticised by a regulator. It could also be important evidence of the OR’s
culpability if something untoward happens while you are in office but before
you have been provided with the documentation that allows you to take action.
