Deciphering the October Fees Rules Compliance Alliance © Resources for IPs LLP t/a The Compliance Alliance

Deciphering the

October Fees Rules

Compliance Alliance© Resources for IPs LLP t/a The Compliance Alliance

Overview

• What cases are affected• Which fee basis to seek• When to seek approval• How to seek approval• How to deal with exceeding a fees

estimate• New reporting requirements

• Some practical questions


Overview


Rule no.

IR86 rule

affected Case type affected Main provision

1 N/ A Introduction

2 R2.47 ADM Additions to progress reports

3 R2.106 ADM New initial fees approval process

4 New R2.109AB ADM New process for exceeding the fees estimate

5 New R2.109D ADM

Which creditors approve exceeding the fees estimate when a past

Para 52(1)(b) statement is no longer relevant

6 R4.49B WUC (by extension, CVL and MVL) Additions to progress reports

7 R4.127 WUC, CVL New initial fees approval process

8 New R4.131AB WUC, CVL New process for exceeding the fees estimate

9 New R4.131D WUC, CVL

Which creditors approve exceeding the fees estimate when a past

ADM Para 52(1)(b) statement is no longer relevant

10 R6.78A BKY Additions to progress reports

11 R6.138 BKY New initial fees approval process

12 New R6.142AB BKY New process for exceeding the fees estimate

13 [R7.11] [Not relevant to fees process]

14 R13,13 All the above Definition of a fees estimate

15 N/ A All the above Relevant dates for application per case type

The Insolvency (Amendment) Rules 2015

SI No. 443 of 2015

What cases are affected

• Not:• IVAs, CVAs, ADRs, Recs, • MVLs (except for reporting)

• Not listed:• SoS-appointed liquidators

• Special rules:• Para 83 CVLs…• Court-appointed Compulsories…• … following from pre-1 Oct 15 ADMs


Which fee basis to seek

• Fixed sum?• Percentage?• Time costs?• Or a combination?



• Common to all fee bases:

• Prior to determination of the fee basis, give to all creditors:• Details of the work the office holder proposes to undertake; and• Details of the expenses that the office holder considers will be, or are

likely to be, incurred

• In progress reports, disclose:• Whether the expenses incurred (or anticipated to be incurred) have

exceeded (or are likely to exceed) the original estimate; and• The reasons for any excess



• For time costs, also:

• Prior to determination of the fee basis, give to all creditors:• “The fees estimate”

• In progress reports, disclose (translating from rules-speak):• Whether the fees (that the office holder intends to draw) are likely

to exceed the original (or revised) approved fees estimate; and• The reasons for any excess

• Where the office holder wants to draw fees in excess of an approved fees estimate, he must request approval


When to seek approval

• No change for BKYs, Compulsories, or…

• … ADMs, however…

• No early approval by secured creditors for Para 52(1)(b)s



S98 CVLs

• Pre GM and pre S98?• “Liquidator” must provide information

• Post GM and pre S98?• “Liquidator” must provide information• SIP8: notices to creditors no later than

notices to shareholders• Notices first, fee/expenses information

later?

• Post GM and post S98?• Rule 4.54 meeting



ADM-CVLs and ADM-Compulsories

• ADM CVL/Comp 1 Oct• R4.127(5A): fee basis carries over

• ADM 1 Oct CVL/Comp• Liquidator’s fees approved via new process

• 1 Oct ADM CVL/Comp• R4.127(5A): fee basis carries over


How to seek approval

• Prior to determination of the fee basis, give to all creditors:

• Details of the work the office holder proposes to undertake; and

• Details of the expenses that will be, or are likely to be, incurred

• And for time costs:• A fees estimate

• Creditors’ resolution (meeting/correspondence)• ADM Para 52(1)(b): secured (and preferential)

creditors Compliance Alliance© Resources for IPs LLP t/a The Compliance Alliance

How to seek approval: fees estimate• “A written estimate that specifies:

1. Details of the work the IP and his staff propose to undertake;

2. The hourly rate or rates the IP and his staff propose to charge for each part of that work;

3. The time the IP anticipates each part of that work will take;

4. Whether the IP anticipates it will be necessary to seek approval or further approval under R2.109AB, 4.131AB or 6.142AB; and

5. The reasons it will be necessary to seek such approval.”


How to seek approval: fees estimate

1.“Details of the work the IP and his staff propose to undertake”

• Draft SIP9: “helpful to… divide… key tasks into areas such as: statutory compliance, asset realisation, distribution, investigations”

• File maintenance, case reviews..?

• “Milestones”..?



• Dear IP 65“Estimates of fees may be given up to the completion of the case, or where it is not possible to anticipate the fees to completion, up to a particular milestone or for a designated period.

The estimate should make clear the period/point to which it applies and provide an explanation why the office-holder anticipates it may be necessary to seek further approval.”



2. The hourly rate or rates the IP and his staff propose to charge for each part of that work

• Standard charge-out rate sheet?

• Inflationary increases?

• Case transfers? New staff grade?



3. The time the IP anticipates each part of that work will take

• SIP9 matrix?

• “Each part of the work”?

Administration & Planning: 10 hoursAsset Realisation: 20 hours

..?



4. Whether the IP anticipates it will be necessary to seek approval or further approval under R2.109AB, 4.131AB or 6.142AB; and

5. The reasons it will be necessary to seek such approval.

• Estimate for entire case: “I do not expect to seek further approval, but…”

• Estimate for period: “I anticipate seeking further approval at the end of year one...”

• Estimate for milestone: “If [x] happens, then I anticipate seeking further approval…”



ADM-CVLs / ADM-Compulsories (both post 1 Oct)

• The Administrator’s fee estimate may include the “remuneration anticipated to be charged and expenses anticipated to be incurred if the administrator becomes the liquidator where the administration moves into winding-up”

• R4.127(5A) applies in all cases• … but the Liquidator could start with

a zero fees estimate


How to seek approval: expenses estimate

• “Details of the expenses that the office holder considers will be, or are likely to be, incurred”

• Not bound by the expenses estimate

• Expenses for the entire case

• Category 2s, advertising, bonding

• Case-specific• ADM-CVLs: “may” include liquidator’s

expenses

• “Likely”, not “possible”


How to deal with exceeding a fees estimate

• “The request for approval must specify:

1. The reasons why the office-holder has exceeded, or is likely to exceed, the fees estimate

2. The additional work the office-holder has undertaken or proposes to undertake;

3. The hourly rate or rates the office-holder proposes to charge for each part of that additional work;

4. The time that additional work has taken or the office-holder anticipates that work will take;

5. Whether the office-holder anticipates that it will be necessary to seek further approval; and

6. The reasons it will be necessary to seek further approval.”



• Seek approval from…

• Where a committee fixed the basis, to the committee;

• Where the court fixed the basis, to the court; and

• Where the creditors fixed the basis, to the creditors.

• “Request” or proposing a resolution?



• “Where the creditors fixed the basis, to the

creditors.”

• Para 52(1)(b) ADMs

• Still no dividend?

• ADM-CVLs/Compulsories where theoutcome has changed• fee basis still approved• but excesses to be approved by creditors’ resolution


New reporting requirements

• “a statement setting out whether as at the date of the report:

• the remuneration anticipated to be charged by the office-holder is likely to exceed the fees estimate or any approval given under R2.109AB/ R4.131AB/R6.142AB (i.e. excess fees),

• the expenses incurred or anticipated to be incurred are likely to exceed, or have exceeded, the details given to the creditors prior to the determination of the basis of remuneration, and

• the reasons for that excess.”


New reporting requirements

• ADMs, BKYs, Compulsories…

• … so by extension, also to CVLs… and to

MVLs

• “whether” estimates have been/will be exceeded

• and “reasons”, not quantum• repeat for expenses estimates in all

progress reports


Practical questions

• What basis or combination of bases of fees will you seek?

• Fixed fee for statutory elements?

• Disciplined time recording?

• When will you seek approval, especially for CVLs?

• (i) Pre GM/S98; (ii) Post GM & Pre S98; or (iii) Post GM/S98?

• Big changes for CVLs in 2016 rules


Practical questions

• How will you present fees and expenses estimates?

• Rules’ bare minimum?

• Look from creditors’ perspective

• How will you come up with estimates?

• Analysis of past cases or gut feeling?


Practical questions

• Will you continue to charge time to your existing categories or will you take this opportunity to have a fresh look at your time recording system?

• Old SIP9 v new SIP9• Can you change the system?• Encourage greater care

• Will you seek approval on a milestone basis in some

cases?


Practical questions

• How will you monitor approved estimates against billings and time costs recorded?

• Rigorous processes• Flag in advance of fee cap?

• How will you deal with creditor apathy?


THE END

Michelle Butler

Mobile: 07704 887325

email: [email protected]

[email protected]

Twitter: @thecompalliance

LinkedIn: https://www.linkedin.com/company/the-compliance-alliance

Website: http://thecompliancealliance.co.uk/


Documents

Deciphering the October Fees Rules Compliance Alliance © Resources for IPs LLP t/a The Compliance Alliance