I was asked this question informally by an IP and I hope that she will not mind me using it as an illustration of how I hope this blog content will develop. I invite any IP or others working in the UK insolvency industry to send to me queries (at email@example.com) on technical, ethical or SIP matters (but please bear in mind that I’m not a solicitor!) and I will provide my thoughts, confidentially if you would prefer, but I am a great believer in sharing information, so I’m hoping to post the results (avoiding any hint of the identity of the enquirer, of course) on this blog. The usual caveats apply: these are purely my own views and are not to be relied upon.
So to the query: a liquidator, IP1, is replaced by IP2. Can IP2 draw his fees on the basis of a resolution put forward by IP1 whilst he was in office and approved by creditors before IP2 came on the scene?
Cases after 6 April 2010
The answer appears simple for cases that commenced after 6 April 2010 (having regard, of course, to the effects of the transitional provisions): R4.131B of the IR86 states that “if a new liquidator is appointed in place of another, any determination, resolution or court order in effect under the preceding provisions of this Section of the Chapter immediately before the former liquidator ceased to hold office continues to apply in respect of the remuneration of the new liquidator until a further determination, resolution or court order is made in accordance with those provisions”. There are similar rules for some other insolvency types – R2.109B for Administrations and R6.142B for Bankruptcies – but, as to be expected, there are no such provisions for VAs or Receiverships.
Cases before 6 April 2010
There are no statutory provisions to deal with this matter for cases pre-April 2010, so I would suggest that the answer lies in the wording of the original resolution. If the resolution is of the usual style, “remuneration shall be fixed by reference to time properly given by the liquidator and his staff…”, then it would seem to me that the actual identity of the liquidator does not come into the equation, although of course the thoughts of the creditors when they considered the resolution would be concentrated on IP1. I believe that this resolution technically would apply also to IP2’s remuneration on his succession. The matter would be different, however, if the original resolution specifically referred to IP1 (and/or his firm, if that is different from IP2’s).
There is an ethical angle here too, however. Given that the creditors approved the original resolution on the basis of the charge-out rates of IP1 and his staff, some may question the ethics of IP2 relying on such a resolution to draw fees at significantly higher charge-out rates. SIP9 (paragraph 16) does provide that creditors be informed of changes in charge-out rates when reporting routinely, but it would seem to me fairer to creditors to explain to them up-front, when the change in office-holder has taken place, that IP2 is relying on the original fees resolution and providing details of his and his staff’s charge-out rates. Personally, I do not believe that it would be necessary to seek a new resolution to approve IP2’s time costs if different charge-out rates apply, but this may be a method of heading off future challenges or complaints.