Review of Insolvency Practitioner feesAuthor: Professor Elaine Kempson
Funded by: The Insolvency Service
Published by: The Insolvency Service
Publication date: July 2013
Concerns continue to be raised regarding the charges, including both remuneration and expenses, made by insolvency practitioners (IPs) and the impact that this has on the position of unsecured creditors and personal debtors in insolvency situations. That such concerns exist is not generally disputed; nor would many claim that there have been no cases involving excessive fees. Beyond that, opinion about the extent of unreasonable, or even excessive, fees is divided. So, too, is opinion on the efficacy of the control and redress mechanisms that exist. But the evidence base is thin. This review has built on previous work conducted by the OFT and was commissioned to:
- assess whether controls within the fees regime work or whether different provisions (e.g. an ability to restrict the level of fees charged) would provide better incentives to ensure fees charged are fair and work done is in the interests of creditors.
- consider whether the regulation of IPs operates in a way that encourages fair charging and works in the interest of creditors
- examine the legislative framework for the fees charged by IPs, and make a comparative assessment against international models, of how well existing fee controls work in practice.
- assess whether further changes need to be made to provide confidence to creditors (particularly unsecured creditors) and personal debtors that the fees they are charged by IPs are fair and commensurate with work done for the benefit of creditors.
- assess whether further changes should be made to improve the speed and level of returns for unsecured creditors, without impairing the provision of credit to business or consumers.
The review covers both personal and corporate insolvency, recognising that different conclusions may be drawn for these two separate fields. The main focus is on the procedures that have led to the greatest levels of concern about fees: Administration, Creditors’ Voluntary Liquidation and Compulsory Liquidation, in the corporate sector and bankruptcy in the personal sector. Pre-packaged administrations were not covered as they are the subject of a separate, but related, review.
This report describes the present system of control on fees (section2) and the fees charged by IPs (section 3), before presenting the evidence on whether or not the existing controls on IP fees are working as intended (section 4) and the evidence relating to the consequences of some controls being ineffective (section 5). Section 6 presents the conclusions drawn from the review and identifies areas where change is needed.
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