Paragraph
23 of the current version of SIP 9 makes it clear that the principles contained
in the SIP apply equally to the approval of pre-appointment costs and
post-appointment remuneration. Whilst
this has clearly been picked up as applying in Administrations, we are finding
that it is sometimes over-looked in CVLs in respect of statement of affairs and
section 98 meeting fees.
Where
a resolution is being sought at the section 98 meeting for the approval of a
statement of affairs fee and/or section 98 meeting fee, then details of what
has been achieved and how it was achieved must be disclosed to that
meeting. The easiest way to do this is
to include in both the section 98 script, if one is used, and the minutes of
the meeting, some standard wording about generic actions that always have to be
undertaken in all cases. That could
include reference to extracting information about assets and liabilities from
the company’s accounting records, assisting the directors in drafting a report
for creditors, and assisting the company secretary in convening the meetings of
members and creditors. There will often
also be some case specific work undertaken, such as liaising with a petitioning
creditor, dealing with the landlord, or speaking to a sheriff’s officer, and information
about such case specific actions should also be included.
In
addition, if any of the pre-appointment work has been sub-contracted then the
section 98 meeting must also be provided with details of that that work, who
did it and the amount paid to them.
Finally,
what disclosure needs to be made if a resolution for the approval of the
pre-appointment fees is being sought on a time cost basis? We have already
pointed out that paragraph 23 applies the same principles to the approval of
remuneration for pre-appointment work as to post appointment remuneration, and
paragraph 12 makes it clear that where approval of post appointment
remuneration is being sought on a time cost basis at a time when post
appointment work has already been carried out on the insolvency case, then information
about those time costs should be provided to creditors. As a result, in view of the interaction
between those two paragraphs we consider that where a resolution is being
sought at that meeting approving payment of pre-appointment fees on a time cost
basis details of the time units used, the charge out rates for all grades of
staff involved, the time spent, the charge-out value, and the average
charge-out rate should be disclosed to the section 98 meeting. Our interpretation of the interaction between
paragraphs 23 and 12, and hence the need to make such disclosure about time
cost information, is by no means certain, but making the disclosure is a risk
averse approach that means there is no doubt that you would be complying with
SIP 9.
