A fee weeks ago we put a short post on our Blog entitled “Trust monies and the ISA”, which you can read by clicking here. This issue has all come about because of a recent change in policy of the Insolvency Service who are now asserting that third party funds provided in respect of an annulment should attract SoS fees. Apparently, that is on the basis that they are funds relating to the bankruptcy estate since they have been provided in lieu of the trustee realising the bankrupt’s assets. Our view, supported by a well-known and respected solicitor, is that they are not, but our views will shortly be academic as in the last few days we have been made aware of two Court hearings regarding this issue. In one instance the application has been made by the OR and in the other by the trustee and they are due to be heard later this month. Hopefully the hearings will be before a suitably experienced insolvency Registrar or Judge so that they can be dealt with on the day and not adjourned, since it is clearly in the interests of all stakeholders, particularly the debtors, for this to be resolved quickly.
In the meantime, since there is a possibility that the Court may say that such third party funds do attract SOS fees and so need to be remitted to the ISA you should not pay out any such monies currently held in your clients' account until the cases have been decided. If you did, then the Insolvency Service may well look to you to pay the fees due. Added to which, we understand that the Insolvency Service are currently attending Court on annulment applications to set out their views on the SOS fees due, and presumably to ask that the annulment hearing be adjourned until the outcome of the ongoing Court cases is known.
Remember that this is only an issue for cases commenced, i.e. petition issued, before the new Insolvency Service fees regime came into force on 21 July 2016, since it is only in those cases that SoS fee are charged as a percentage of realisations. For cases commenced since that date SoS fees are charged as a flat rate regardless of the level of realisations, although that then leads on to another issue. Will the fees be rebated in the event of an annulment on grounds of payment in full? Guidance on this was promised by the Insolvency Service, but we have not seen any as yet, which is also unhelpful for stakeholders.
