What are the Fees of an Insolvency Practitioner?

An Insolvency Practitioner’s (IP) fees vary quite considerably depending on the kind of industries they work in, the cases they work on, the complexity of any given case and their location. For this reason, it can be difficult to say how much the average IP’s fee will be, but we can guide you through the different fees that typically have to be paid.

The nature of fees in insolvency proceedings

Insolvency Practitioners have an obligation to be transparent and fair in all their dealings. They should provide fee information to creditors as set out in the Statement of Insolvency Practice 9 –  ‘Payments to Insolvency Office Holders and Their Associates’.

Insolvency practitioners’ fees are always subject to creditor approval whether they relate to individuals or companies. Fees are often charged on a time cost or fixed fee basis, although some IPs will recoup their fee as a percentage of the sum raised from the realisation of particular assets for distribution among the creditors.

If an insolvency practitioner is seeking approval from creditors for fees on a time cost basis, they will be required to provide an estimate of the fees and expenses at the outset of the procedure. Some office holders will approach creditors when notices are initially sent out,, before they actually become the IP.

Other, Insolvency Practitioners will wait until they are appointed in order for them to consider the complexity of the case and then circulate to creditors their fee estimate. If the IP wishes to change the original estimated fee, they must then seek approval from the company’s creditors.

Whether an Insolvency Practitioner charges a fixed fee or an hourly rate, the costs can be considerable. While you should not necessarily choose the cheapest, you should certainly discuss an IPs fee structure before they are appointed.

Summary of fees in insolvency proceedings

The IP’s costs will depend on the particular insolvency procedure undertaken. In a liquidation procedure, there will be an initial charge for calling a creditors’ meeting and producing the statement of affairs. This is known as the statement of affairs fee and will either be paid as an expense of the winding up or alternatively will have been paid by the company or directors’ prior to insolvency.

Once the company is in liquidation, there will be a number of costs associated with the liquidation itself, including realising and distributing the company’s assets; statutory compliance and investigation work . There may also be court costs and disbursements to consider.  

In the case of a company voluntary arrangement (CVA), the insolvency practitioner’s fee will usually be paid from the contributions paid into the arrangement. This will include a nominee fee, which is deducted from the monthly payments once the CVA is up and running; and a supervisor’s fee for the ongoing supervision of the arrangement.

Who pays an insolvency practitioner’s fee?

It is often assumed that the owner of the failing business pays the insolvency practitioner’s fee, but that is not usually the case. In most instances, the insolvency practitioner’s fee will come from the pot of money that is distributed to creditors during insolvency. In effect, that means it is the company’s creditors who ultimately pay the IP’s fee.

If you have any queries relating to Insolvency Practitioner fees then please call Sue Collins now on 0208 444 2000 or email sc@aabrs.com.

Written by: Sue Collins

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