Insolvency Amendment Rules – fee estimates
On 1 October 2015, the Insolvency (Amendment) Rules (SI 2015/443) came into force, which are intended to regulate fees charged by insolvency practitioners on a time cost basis. This will apply to all appointments and nominations of administrators, liquidators and trustees in bankruptcy on or after 1 October 2015.
Essentially, insolvency practitioners will be required to provide a fee estimate as part of their progress reports to creditors for their approval. Once it has been approved, the fees estimate cannot be exceeded without the approval of the creditors. In every progress report to creditors, the insolvency practitioner must include a specific statement to advise whether or not the estimate is likely to exceed the original estimate, and if an increase is likely then a reason will need to be given.
All creditors are to be provided with details of the fee estimate which should include the work proposed, the hourly rate claimed, the time estimated and whether further approval is anticipated. If the fees are to be exceeded, then the insolvency practitioner will also need to give an explanation as to the reasons for this.
As legal fees will come out of the insolvent estate as an expense, we will need to provide the insolvency practitioners with full estimates of our costs and disbursements at the outset of instructions in order that these costs can be accounted for within the insolvency practitioner’s fee estimate. We will also need to provide clearer details of the work which is required. This estimate will need to be regularly reviewed to ensure that we do not exceed it. The estimate we have given the insolvency practitioner should then be clearly recorded on the file.