McTear Williams & Wood

Introduction

The insolvency legislation was changed in April 2010 for insolvency appointments commenced from that time in order to allow more flexibility on how an office holder’s fees are charged to a case.  This sheet explains how we may apply the alternative fee bases.  The new legislation allows different fee bases to be used for different tasks within the same appointment.  The basis or combination of bases set for a particular appointment are subject to approval, generally by a committee if one is appointed by the creditors, failing which the creditors in general meeting, or the court.  Further detail about how an office holder’s fees are approved for each case type are available in a series of guides issued with Statement of Insolvency Practice 9 (SIP 9) and can be accessed at http://mw-w.com/fees-and-costs.html Alternatively a hard copy may be requested from McTear Williams & Wood, 90 St Faiths Lane, Norwich, NR1 1NE.

Once the basis of the office holder’s remuneration has been approved, a periodic report will be provided to any committee and also to each creditor. The report will provide a breakdown of the remuneration drawn and time costs incurred and will also enable the recipients to see the average rates of such costs.  Under the new legislation, any such report must disclose how creditors can seek further information and challenge the basis on which the fees are calculated and the level of fees drawn in the period of the report.  Once the time to challenge the office holder’s remuneration for the period reported on has elapsed, then that remuneration cannot subsequently be challenged.

Under the old legislation, which still applies for insolvency appointments commenced before 6 April 2010, there is no equivalent mechanism for fees to be challenged.

Time cost basis

This is the basis that we use in the majority of cases using charge out rates appropriate to the skills and experience of each member of staff and the work that they perform.  This is combined with the amount of time that they work on each case, recorded in 6 minute units with supporting narrative to explain the work undertaken.  Cashiers, secretarial and support staff charge all the time they work as such work has not been allowed for in calculating the hourly rates charged by the partners and other staff.  If such time were not charged our charge out rates for Partners and other staff would be approximately 15% higher.  Time billed is subject to Value Added Tax (VAT) at the applicable rate.

Charge out rates

Our charge out rates are reviewed on 1 January each year and since January 2003 have increased by approximately 5% per annum to take account inflation and market forces.  Since 1 November 2011, when more detailed information about charge out rates became necessary, our charge out rates have been as summarised below.

Percentage basis

The new legislation allows fees to be charged on a percentage of the value of the property with which the office holder has to deal.  Different percentages can be used for different assets or types of assets.  Where we would like to realise any asset or type of assets on a percentage basis we will provide further information explaining why we think that this basis is appropriate and ask creditors to approve the basis.

Fixed fee

The new legislation allows fees to be charged at a set amount.  Different set amounts can be used for different tasks.  Where we would like to charge a set amount for a task or different set amounts for different tasks we will provide further information explaining why we think that this basis is appropriate and ask creditors to approve the basis.

All bases

The officeholder’s remuneration invoiced to the insolvent estate will be subject to VAT at the prevailing rate other than on individual and company voluntary arrangements on which no VAT is charged.

Agent’s costs

Charged at cost based upon the charge made by the Agent instructed, the term Agent includes:

• Solicitors/Legal Advisors
• Auctioneers/Valuers Accountants
• Quantity Surveyors
• Estate Agents
• Other Specialist Advisors

Disbursements

In accordance with Statement of Insolvency Practice 9 (SIP9) the basis of disbursement allocation in respect of disbursements incurred by the Office Holder in connection with the administration of the estate must be fully disclosed to creditors.  Disbursements are categorised as either Category 1 or Category 2.

Category 1 expenses are directly referable to an invoice from a third party, which is either in the name of the estate or McTear Williams & Wood; in the case of the latter, the invoice makes reference to, and therefore can be directly attributed to, the estate.  These disbursements are recoverable in full from the estate without the prior approval of creditors either by a direct payment from the estate or, where the firm has made payment on behalf of the estate, by a recharge of the amount invoiced by the third party.  Examples of category 1 disbursements are statutory advertising, external meeting room hire, external storage, specific bond insurance and company search fees.

Category 2 expenses are incurred by the firm and recharged to the estate; they are not attributed to the estate by a third party invoice and/or they may include a profit element.  These disbursements are recoverable in full from the estate, subject to the basis of the disbursement charge being approved by creditors in advance. Examples of category 2 disbursements are photocopying, internal room hire, internal storage.

Whilst we charge for category 1 disbursements we do not re-charge category 2 disbursements as we consider the costs of capturing this information is disproportionate to the amount that can be charged and so do not re-charge these.

Updated: 15 January 2011