News & Publications - Insolvency & Recovery

Changes to the Insolvency Rules

Since 6 April 2010, the Insolvency Rules have been amended.

The 2010 Rules have made three significant changes in relation to the remuneration of Administrators.

Under the new Rules, an Administrator can:

• recover fees and costs incurred before his appointment, as an expense of the Administration;
• be remunerated for his work as an Administrator on a fixed fee basis;
• be remunerated on a different basis for different aspects of his appointment.

Pre-Appointment costs:

These are fees and expenses which the IP has not been paid for at the date when the Company goes into Administration but which were incurred with a view to the Administration of the Company.

These would cover out of pocket expenses and professional advisers' fees retained by the IP.

For these fees to be recovered, the Administrator must set out all details of pre-appointment costs in his paragraph 49 proposals to Creditors under Schedule B1 of the Insolvency Act 1986.

Fixing the basis of the Administrator's remuneration:

An Administrator may be paid for acting as Administrator in one of the following three ways:

• the asset value basis
• the time cost basis
• a fixed fee (as amended by the 2010 Rules

The basis can change depending on the type of work - for example, in negotiating the sale of the business' assets on a fixed fee basis but in collecting debts and agreeing claims of Creditors on the time costs basis.

These changes introduce a potential competitive element into tendering for work of this nature - in relation to the level of charges - for all or part of the Administrator's work.