MD Law’s insolvency team has a particular expertise in advising upon office-holders’ remuneration and obtaining fee approval via the Court. During 2024, our team made 22 remuneration applications to Court with a combined approved fee value in excess of £500,000. These applications comprised initial determinations and increasing and/or changing the basis of office-holders’ remuneration.
As many office-holders are aware, it is not always an easy task to obtain fee approval from creditors, given the need for positive engagement. Our team has seen that, unless the office-holders can provide creditors with assurance of a dividend prospect, they are often not interested in voting on any decision procedure.
In the case of an administration or a voluntary winding up, if creditors have failed to fix the office-holders’ remuneration, an application to Court must be made within 18 months of the date of appointment, otherwise the office-holders risk not being entitled to any remuneration.
In the case of a compulsory winding up or bankruptcy, should the office-holders’ remuneration not be fixed within 18 months, the scale rates become applicable. However, when looking at what office-holders receive under these rates, they often do not even cover the most basic of statutory duties. As such, an application to Court can be made to change the basis of the office-holders’ remuneration.
The guiding principles that the Court considers in a remuneration application are set out at paragraph 21.2 of Part 6 of the Practice Direction on Insolvency Proceedings. Of particular note are the following:-
- “The benefit of the doubt” – if there is any doubt as to the appropriateness, fairness or reasonableness of the remuneration sought, such element is resolved against the office-holders
- “The value of the service rendered” – the remuneration should reflect the value of the service rendered, not simply reimburse the office-holders in respect of time expended and cost incurred
- “Fair and reasonable” – the amount and basis of remuneration should represent fair and reasonable remuneration for the work properly undertaken or to be undertaken
- “Proportionality of information” – in considering the nature and extent of the information which should be provided, regard shall be had to what is proportionate by reference to the amount of remuneration to be fixed and the nature, complexity and extent of the work to be completed or that has been completed
- “Proportionality of remuneration” – the amount and basis of remuneration should be proportionate to the nature, complexity and extent of the work
Our team has seen that, where sufficient information is provided at the outset (taking the above principles into account), the Court is often willing to deal with these applications on paper, saving time and costs for the office-holders.
The Court typically expects an additional level of detail where office-holders are seeking approval for remuneration that largely relates to estimated future time. The Court is required to take into account whether an application should have been made earlier and, if so, the reasons for any delay. However, our experience is that it is generally an acceptable reason if the office-holders have waited until investigations and/or realisations have progressed substantively, as this will allow both the office-holders and the Judge to have a clearer view on whether the remuneration sought is proportionate and whether value has been provided for the service rendered.
Should you require any assistance regarding office-holders’ remuneration, please contact our team on 0114 299 4890.
