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Following the recent announcement that insolvency practitioners (IPs) will in future be required to provide estimates of fees upfront to creditors, the statutory instrument that gives effect to that announcement has been laid before Parliament.
Jo Swinson MP, Parliamentary Under Secretary of State for Employment Relations and Consumer Affairs, announced by written statement on 3 March 2015 that IPs will be required to provide extra information to creditors about their fees from October 2015. They will need to give a summary of estimated costs and work to be undertaken, following concerns the current system permits excessive hourly fees to be charged.
In responding to the announcement, Giles Frampton, president of R3, said:
'We are very pleased with the government's practical proposals for updating the insolvency fees-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 profession first supported an up-front estimate system in 2011 and we are pleased to see it set to become a reality.'
The Insolvency (Amendment) Rules 2015 (SI 2015/443) were laid before Parliament on 3 March 2015, and will come into force on 1 October 2015 insofar as the requirement for IPs to provide upfront estimates of costs to creditors. This will give IPs time in which to adapt their systems in readiness for the change.
Transitional provisions mean that this requirement will essentially only apply where an insolvency office holder is appointed after 1 October 2015. Further, this requirement applies only to administrations, compulsory and creditors' voluntary liquidations, and bankruptcies.
The announcement and the statutory instrument are underpinned by the office holder providing a 'fees estimate', which is defined as meaning a written statement that specifies:
The main changes made by the statutory instrument are:
new rules set out to whom the request or application should be made, notwithstanding any previous statement made by the administrator that the company had insufficient property to enable a distribution to be made to unsecured creditors (other than by way of the prescribed part)
The statutory instrument also makes a minor amendment to rule 2.106(6) of the Insolvency Rules 1986 (IR 1986) to correct an omission. This amendment will come into force on 1 October 2015.
Additionally, the statutory instrument amends IR 1986, r 7.11(1) to allow the High Court to transfer winding-up proceedings to the County Court at Central London. This amendment comes into force on 6 April 2015. Currently, the High Court can only transfer winding-up proceedings to county court hearing centres in which winding-up proceedings can be commenced—this does not include the County Court at Central London. While it will still not be possible to commence winding-up proceedings in that county court hearing centre after this amendment comes into force, the ability to transfer such proceedings to it will allow a more efficient distribution of business.
The statutory instrument can be found here.
Stephen Leslie, solicitor in the Lexis®PSL Restructuring & Insolvency team.
0330 161 1234