Insolvency Practitioner ("IP") fees and remuneration
Like all service providers IPs expect to be paid for the work that they have undertaken. Fees are usually met either from the assets of the entity they are appointed over or by a party with an interest in the entity (e.g. directors).
The fees of IPs are usually determined by creditors of a business who decide whether they should be based upon the number of hours spent on a case or by reference to a percentage of the assets realised and distributed by them. The creditors that decide upon the basis depends on the circumstances and may be a committee formed by creditors, by secured creditors such as a bank, by preferential creditors or by the general body of creditors.
As specialists, the hourly rate charged by IPs is often higher than a general practice or audit accountant. This rate also reflects the risk that the IP takes in that if the entity has insufficient assets they may not be paid for the work done.
IPs are required to disclose information regarding what work has been undertaken during the administration of the case to certain parties. Creditors can sometimes challenge fees should they consider them to be too high, usually by way of an application to court. Similarly an IP can apply to court if they think that the creditors have set the fees at an inappropriate level. The information and rules are outlined in detail in Statement of Insolvency Practice number 9.
