Any liquidators/administrators in the house?

If so any of you ever do one where the revenue generated comes to more than your fees?

I’ve been dealing with this sort of mullarkey from a suppliers viewpoint for donkies years, and I’ve never yet experienced one where there is anything at all left over after you feckers have had your slice. Explanation please?

There is never anything left!

Liquidators 1st, Banks 2nd – everyone else can forget it!

Insolvency Practitioners: A Corporate Killing
Availability:over a year left to listen
Duration: 40 minutes
First broadcast:Tuesday 12 October 2010Do Insolvency Practitioners measure up to the high standards expected of them when they are called in to a stricken business? Allan Urry examines concerns that some IP’s don’t always act in the best interests of creditors who are owed money when companies fail. Are landlords right to complain they’ve been getting a raw deal because some corporate undertakers side too much with their retail paymasters, who are pushing for reduced rents because their businesses are in trouble.

The Office of Fair Trading is calling for far reaching reforms amid concerns about high fees and low recovery rates for some creditors. So is there proper oversight of a profession which takes a billion pounds in fees each year, but isn’t subjected to much public scrutiny?

BBC File on Four documentary
http://www.bbc.co.uk/programmes/b00v72js

Transcript: http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/12_10_10_fo4_insolvency.pdf

BBC Investigation
http://www.bbc.co.uk/news/business-11514708

There’s a reason firms go under – they’re skint. Hardly surprising that some folk never see anything.

Not one but as a supplier you go into the process as an unsecured creditor. Pretty much towards the bottom fo the queue for the crumbs.

Never seen anything after the Receivers are paid, and surprisingly their fees usually are just less than the monies available…

And its the Directors who appoint the Receivers, not saying there is ever anything going on, but 😉

There’s a reason firms go under – they’re skint. Hardly surprising that some folk never see anything.

Doh! who’d of thought ………..

OF COURSE I KNOW THAT YOU PLONKER!

But does it not strike you as strange that there is never ANY excess at all over and above the amount paid to secured creditors and the Liquidators fees? Don’t you think perhaps that just once in a while there might just be a 1p in the £1 pay out possible?? Especially given that it is illegal to trade while insolvent, so the other end of the same spectrum is that surely if there isn’t then every single liquidated companies directors should be facing criminal charges and probably prison sentences, which they clearly don’t.

So something is smelling, tasting and looking a lot like fish somewhere

I am guessing here – but 1) I suppose that the payment dates for unsecured creditors can be quite elastic, so if Directors can keep pushing that back in a bid to stay afloat, technically they are not insolvent. I suppose it’s a judgment, subjective thing. By the time they can’t do so any more, there’s little left.
2). More to the point, secured creditors liabilities may be significant but payable way into the future in normal trading conditions – they all get accelerated imemdiately upon liquidiation of course (which will wipe all the short term smaller debts out).

Doesn’t count as advice of course.

(2)A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.

From the 1986 Insolvency Act: In other words if forced into liquidation, and consequently substantially unable to settle debts even after the liquidation of assets then self evidently a criminal offence has been committed by the directors. i.e. it is illegal to trade whilst insolvent.

That’s a balance sheet test of insolvency. Most auditors and the like today look at cashflow insolvency first (balance sheet being open to subjective decisions and as above taking no account of timing).

Anyway, I am just guessing so will shut up on this now!

Nice links Stoner

When firms go bust it is the insolvency practitioner’s job to get the best price for the creditors from the remaining assets through the administration process, or try to get returns if a company is forced into liquidation.

They are remarkably poor at that but remarkably good at getting high fees for themselves so i would lean towards agrreing with the OP

Thats the actual wording of the Act. Not really open to much interpretation frankly.

Actual fees from todays farce

Partner £250 -£275 per hour
Manager £140 per hour
Administrator £60 -£95 per hour
Assistant and support staff £65 per hour

Travel 45 pence per mile
Labels £0.01 each
Headed paper £0.10 per sheet
Plain paper £0.10 per sheet
Large envelope £0.10 each

You can figure the rest from there

How do they get away with that £65 FOR ADMIN and £65 for support staff

No doubt all on minimum wage

It would seem hard to achieve your primary duty if you charge those rates

Thats the actual wording of the Act. Not really open to much interpretation frankly.

I sincerely hope you’re not a lawyer.

Because that’s dangerously wrong.

Because that’s dangerously wrong

No its not, in the context of the thread it is self evident that a company has been trading whilst insolvent if it transpires that there are insufficent assets to even pay off its secured creditors, let alone unsecured. No doubt they will have been happily valuing their stock at the lower of cost or “nett realisable” value for years to avoid tax, so they can’t even claim that it comes as a shock when it doesn’t realise full value one day, now can they??

Just to support that here are some actual figures

A case in Brighton: Total Assets £72,757 Total Liabilities £707,270

A case in Newbury: Assets £12,000 Total Liabilities £121,858

A case in Scotland: Assets £137,768 Total Liabilities £1,030,005

A case in Manchester: Assets £1,557 Total Liabilities £224,549

Call me old fashioned, but allowing for all contingencies, halving the value of my liabilities and multiplying the value of my assets by 3 I reckon I’d still be able to suss out in all of these last 4 that I’ve dealt with that things might be going tits up, and that would sometime before I got to any of these points!!

No its not

OK. Since you’ve offered, I’ll bite. We’ll leave out breach of fiduciary duty and common law provisions.

Legislation is rarely, if ever cut and dried. If it was, the courts would be empty. As it is, it isn’t and they’re not.

Directors need to consider fraudulent and wrongful trading. You can guess which is a criminal activity (if you can’t, it’s fraudulent trading). For that, have a look at Re Patrick and Lyon. It’s a case from the 1930s and sets out a dishonesty test.

Wrongful trading doesn’t require dishonesty (and so has a lower standard of proof). There are subjective and objective tests to when the directors need to stop trading and call in an admin to run the business. A good start is Re Marini.

in the context of the thread

The context of this thread – your own – is the fee charging by IPs and how there’s little left in the pot for the unsecured creditors.

If you’re going to talk about context, try considering the whole legal position, not just the one provision you quoted. Because, let’s face it, no-one likes making themselves look a fool, do they?

10p per sheet of paper? Someone should tell em they’re getting their pants pulled down on that one, poor mites. they wanna get down to staples

£65 FOR ADMIN and £65 for support staff
No doubt all on minimum wage

oh yeah and that too 🙄

While I’m not going to argue about the fees and practices of IP’s, my only experience of them has been fair. I do wonder if the OP has ever been in the situation where he’s seriously got to consider employing them. It’s a very difficult decision to make when one contract or a small upturn in sales will be the difference between losing your livelyhood, putting x number of people out of work and losing what you’ve worked for for x years.

Considering how hard this decision is, it is very easy to put if off, and put it off, probably for too long. Once the decision is made and the IP has been called upon, stock and assets become worthless, it’s almost impossible to get any value from them and you end up with the situation where assets are worth substantially less than what is due.

+1 gearfreak

But the discussion isn’t really about how a company goes under, more how the receivers do well and manage to charge top wack, whereas everyone else – gets next-to-nowt.

And having worked in ‘professional services’…

Partner £250 -£275 per hour
Manager £140 per hour
Administrator £60 -£95 per hour
Assistant and support staff £65 per hour

I used to do this work in the early-mid 90s and those fees were what was charged then!

Any Director will be trying to keep a business going and will value assets on the basis of it being a going concern. IPs generally have to deal with assets at distressed sale valuations which are inevitably lower. Whatever event triggered the insolvency doesn’t necessariy mean the directors were wrong to keep going before that event.

Plenty of jobs IPs do see them only recover partial or no fees. Used to do plenty of fixed fee work. Fee basis is agreed at the start of the appointment, so challenge it then or live with someone else having agreed the basis.

I am clearly not a plonker and OMITN has handed your backside to you on a plate.

Perhaps it’s you that’s the Rodney.

When one of my previous employers went under after about a year I got a cheque for 20p when the administrators finished.

This was after they failed to pay me my last months wages plus £2k of other money they owed me.

So sometimes there’s a little more. My solicitor did actually do a good job though. Which he should of for the amount he charged me to look through a contract when I was made redundant.

OK Ourman, lets try it again.

1) On the IP front to whom are you/they responsible?
2) Is it or is it not the case that trading while knowingly insolvent is illegal and fraudulent
3) Is it or is it not the case that it is the responsibility of a director to firstly know about the financial position that the company is in, and secondly therefore that ignorance or stupidity cannot be used as a defence?

So using one of the actual examples given above

(A case in Manchester: Assets £1,557 Total Liabilities £224,549)

No stock was “involved”. So just run past me how that it is in any way defensible, and what the liquidator should have done in these circumstances.

I am clearly not a plonker

You also are inaccurate

Berm Bandit, you’re really not encouraging anyone to help you understand with an attitude like that, but here goes anyway.

If a business goes under with, say, 5 years left on a lease, that 5 years rent goes in the liabilities box. The business might have had perfectly valid expectations of making money to cover that rent during those 5 years.
Major customer goes bust.
Major supplier ceases supply.
Production problem causes huge cash headache.

Loads of reasons and if Directors are trying to weather such a storm to recover the business or pull the plug when one happens that doesn’t mean they were wrong to keep going up to that point.

I think what the OPs really trying to get at is why (if there’s no money) do the administrators manage to pay themselves so much?
Is it right that they can go in knowing that they can help themselves to any funds whilst the creditors who have actually provided goods and services presumably at a reasonable rate/cost get whatever remains. And, whatever remains is always zero as the administrators fees always seem to equate exactly to whatever the assets are worth (funnily enough).
I’m surprised it’s legal.

As I said before, their remuneration is set by creditors. Creditor apathy around the appointment does not aid sensible fee structures.

I agree with wrecker [ what a pleasant surprise for us both]
Oldbloke when you say it is set by the creditors what exactly do you mean and which creditors?

I find it hard to believe creditors owed money by a business with no money would agree to those rates for that service – the admin charge is beyond a piss take and no one offering admin at those rates would be in business

What does the phrase mean exactly- they write to them all and they vote on who to appoint?
How can the creditors choose when the liquidators wont now who they all are at the start etc

I would assume it is legal but it is also immoral and in no way reflects the actual cost to the business in much the same way a ban charge in no way reflects the cost to the bank.

As there are some people genuinely out of pocket and doubtlessly some business at risk of folding it seems odd , to put it mildly, that the liquidators are taking such high hourly rates.

Guide to setting fees

Here’s a short explanation for Liquidation fees. If no creditor bothers engaging with the process the IP will generally have voting proxies with which to manage the process they way they want.

When an IP goes in they have already agreed their fee with the directors for their services. They will then take their fee from the assets as they are liquidated. They still have a risk of being unpaid if assets have been overvalued or charges held over them.
Creditors can liquidate a company too but they have to stand the fees out what is recovered. Since they most are unsecured creditors this doesn’t tend to happen as they will get the dregs of what is left.
Creditors/suppliers should be doing their own credit checks to ensure their new client is credit worthy and continue to make sure they are within their credit limits. If you are continuously the victim of companies that are going under then you should be looking at your own credit control.

I share the OP’s frustration at the fees which are charged by IP’s and the hourly rate is more like £450 plus. i I’m based in shropshire and this seems to be the going rate. i would hate to think what the rates are in London.

However they are dealing with a business which has gone bust. Either intentionally to wash away debt, usually to the crown plus any other creditor. They then phoenix the business with a friendly administrator and start new co. the galling aspect here is it’s the same directors, employees, offices except the debt has legally been wiped away. its the administrators job to extract as much value as they can to pay the creditors. costs for a per pack are around £40k all in.

If its not a pre pack then its usually down to a winding up order going in, usually from HMRC.

In the pecking order you have lenders, banks or credit companies. If you don’t need the credit then a bank will extend a credit line, usually through invoice dis-counting. You do get stand alone invoice discounting businesses as well which charge more than mainstream lenders. This is a facility which secures the lenders money on outstanding invoices from the business and means the company can get their hands on cash quickly and usually up to 80% of the value of the invoice. This is one line of credit.

If you have capital equipment you can usually find a lender who isn’t so fussy who they lend to but if the market value of the equipment is £100k you will be lucky to see half that in cash terms with eye watering interest rates which will be levied.

Now the pinch point. A client went bust, The invoice discounting company charged a fee of £40k to collect out. This is where they chase the remaining debt down to recover their money. I shit you not £40k for chasing down customers to the now bust business.

The secured lender will have a structure to recover their costs. Now here’s another aspect. These companies for the most part will make more money on a default than letting the loan run its full term. Read that line again, these guys charge more for a default.

As for appointing the administrator this is usually done by the bank or HMRC and triggers a host of chargable fees by the bank, all of which are secured.

The you have the employees, who are also secured creditors for their redundancy payment.

After that you have Joe bloggs.

If your any of the above, except Joe Bloggs your fine. Joe is toast. Burnt toast with jizz on and your supposed to eat it.

Out of all this the individuals who i detest. The people who pre pack their business. Utter scum

Cheers but i am still confused

The liquidator must call the first meeting of the committee within 3 months of its establishment (or his appointment if that is later), and subsequent meetings must be held either at specified dates agreed by the committee, or when requested by a member of the committee, or when the liquidator decides he needs to hold one. The liquidator is required to report to the committee at least every 6 months on the progress of the liquidation, unless the committee directs otherwise. This provides an opportunity for the committee to monitor and discuss the progress of the insolvency and the level of the liquidator’s fees.

Still not sure how the creditors control this seeing the liquidator is in place [ generally] before they are and they only need to meet 3 months into the process to agree fees – bit late then surely.

i assume many creditors know it is lost and dead money so dont bother and liquidators milk their fees to make sure this happens

Also I can see that
Rules 4.127 – 4.127B of the Insolvency Rules 1986
dont actaully set the rates and I would assume you will hard pushed to find anyone who thinks those rates are reasonable – who on earth would pay that for admin?

I am not sure how this committee can set up and agree the rates if the person is in place for 3 months prior to the first meeting that they alone can call.

Clearly I know nothing about this process so thanks for [spoon] feeding my curiosity.

IP makes fee proposal.
Creditors vote
If no creditors turn up to the meetings, IP does what they want.

Roughly.

You’re looking at rates for professional services – lawyers, accountants etc. Takes a lot to qualify as an IP and unless one of them starts low balling fees or creditors fix lower rates, they’ll charge what they can.

I realise why they would justify them but £65 for admin 😯 Like a lawyer would pay that to their admin staff – that would cost them £2275 for a 35 hour week

I am sure we can all agree that is excessive/taking the piss and legal.

Anyway again thanks for the info/explanation.

They don’t pay that to the staff! I think when I was on £28k I was in theory charged out at £120 / hr. There is plenty of non chargeable time plus office to run etc and few jobs get 100% recovery of fees at headline rates.

OK Ourman, lets try it again.

OK. I’m guessing you didn’t read what I wrote above or either of the cases I pointed you to.

[Quote]1) On the IP front to whom are you/they responsible?[/quote]

Creditors.

[Quote]2) Is it or is it not the case that trading while knowingly insolvent is illegal and fraudulent[/quote]

See my post above. I thought I made a clear distinction between fraudulent and wrongful trading. Note that illegal and fraudulent do not mean the same thing.

I have already pointed out that there are subjective and objective tests to determine whether the actions of any of the directors were trading fraudulently or wrongfully.

[Quote]3) Is it or is it not the case that it is the responsibility of a director to firstly know about the financial position that the company is in, and secondly therefore that ignorance or stupidity cannot be used as a defence?[/quote]

Both. And neither. You seem to be struggling with a basic concept here: it all depends on the circumstances.

Listen, you’re clearly not a lawyer, as every law student and trainee knows this shit. Stop being so chippy, accept that you’re wrong, and deal with the real cause of your concern: people you deal with are going tits up and you want to make sure you recover as much as possible.

Certain creditors have preference.

In most cases its either HMRC or their bank who will appoint the administrator. Again a generalisation but these organisations are looking to recover substantial and secured debt.

The organisations have an approved pool of administrators they choose from.

Unsecured creditors in this case can object at the rates the administrator charge but its the equivalent of a mouse raping an elephant. They are all pretty much the same.

Rehung a fire door a few years ago for a now failed textile shop, cost 70 quid, and eventually they paid up, after visiting the shop for a week every day and ringing head ofice every day.

6 months latter they went bust as a chain, started getting huge envelopes stuffed full of papers about 70 sheets in each one,from the liquidators, asking how much i was owed and that there was little money in the kitty to pay it, and what they where selling the stock and equipment for, basicly pennies,you could have got more down the local car boot sale.The paers also listed their fees which where huge.

But they owed me nothing,but i was still on their database as a creditor.

Standard rate structures are essentially price fixing though. How the **** someone can justify charging £420/hour when there are creditors out there who may well go out of business due to the money owed to them?
I agree that irresponsible directors are the root cause, but the vultures aren’t blameless.

I appoint administrators. There is a market for it like any other profession. It is not money for old rope or everyone would be doing it. Also as a rule creditors will avoid appointing for all the reasons above. Directors will also manage a business into an administration exploiting the grey area in the law. Immoral but why would you wind something up if you can get more out by inching it along and continuing to draw a salary.