Monday, October 12, 2015

Compulsory liquidations and the Insolvency (Amendment) Rules 2015

The Insolvency Service’s omission of a simple reference to section 137 in the transitional provisions of the Insolvency (Amendment) Rules 2015 (“2015 Fee Rules”) is going to cause you problems on your older Compulsory Liquidations where you were appointed by the Secretary of State. The effect of the omission is that rather than just applying to all Compulsory Liquidations where you are appointed Liquidator on or after 1 October 2015, the 2015 Fee Rules will also apply to all Compulsory Liquidations where you were appointed by the Secretary of State, whenever that appointment was made.

This means that if you have not fixed the basis of your remuneration in such cases prior to 1 October then you will have to comply with the 2015 Fee Rules when either convening a general meeting of creditors or, in respect of cases commenced on or after 6 April 2010, when seeking a resolution by correspondence, to fix the basis of your remuneration. When you do so you will need to: provide the creditors with a fees estimate where you want to be remunerated for aspects of your work on a time cost basis; details of the work that you will be undertaking in respect of the work where you want to be remunerated on a fixed fee and/or % basis; and provide an estimate of your expenses for the Liquidation.

In cases where you have already fixed the basis of your remuneration, then if you want to change the basis of your remuneration, or want to increase any cap on your time costs imposed by the creditors or committee to enable you to draw fees in excess of that cap, then you will also have to follow the procedures under the 2015 Fee Rules for increasing fees. In summary you will need to provide the creditors or committee with an explanation as to why you have exceeded, or are likely to exceed, the fees estimate; the additional work that you have undertaken or propose to undertake; the hourly rate or rates that you propose to charge for each part of that additional work; the time that additional work has taken or you anticipate that it will take; whether you anticipate that it will be necessary to seek further approval; and the reasons why it will be necessary to seek further approval. Remember though that if the basis of your remuneration has been approved as a fixed fee or on a % basis then per rule 4.131A an increase in the amount of the fixed fee or the % applied can only be approved in cases where there has been a material and substantial change in the circumstances that were taken into account when fixing the original level of the fixed fee or the % applied. If there has not been a material and substantial change in the circumstances then an increase can only be approved by the court per rule 4.130.

Remember though that Compulsory Liquidations where you were appointed by the Court or at a meeting of creditors are not affected since the transitional provisions in the 2015 Fee Rules do apply to such cases. As a result, the 2015 Fee Rules only apply where you have been appointed Liquidator by the Court or at a meeting of creditors on or after 1 October 2015. Even so, there is still a small wrinkle in the transitional provisions in respect of conversions from Administration where you had been appointed Administrator prior to 1 October and the winding up order appointing you as Liquidator is made on or after 1 October. In those cases you cannot rely on rule 4.127(5A) when acting as liquidator, i.e. you cannot rely on the basis of remuneration fixed for acting as Administrator as being your remuneration for acting as Liquidator. Instead, you will have to seek a new resolution to fix the basis of your remuneration for acting as Liquidator, either at a general meeting or by way of a resolution by correspondence, and the 2015 Fee Rules will apply when you are seeking such a resolution.