Government rejects call to limit insolvency firms' fees
Don't soak the liquidators
Minister for Employment Regulations Pat McFadden yesterday rejected calls to set controls on how much administrators can charge when a company goes into liquidation.
MP Gordon Banks called for the minister to set maximum limits and reduce fees charged by administrators and receivers handling company collapses. Fees are worked out according to time spent on the administration or as a percentage of assets realised by the process.
But McFadden rejected the call. He told the House that fees are agreed by the liquidation or creditors' committee or the creditors themselves if there is no such committee. That amount can then be reviewed by the court - because it is reviewed by the court, government ministers have no power to interfere.
McFadden said therefore he had no plans to limit or reduce fees charged.
While the point might seem rather arcane, with insolvenies likely to increase as the recession grinds on, creditors, particularly smaller suppliers, are likely to be aghast as they see the remaining assets of bust companies eaten up practitioners' fees
The question in Hansard is here. ®
It's a total racket
Another example of corrupt government. The minister who voted against this should loose his next election.
The administrators are the only winners (oh and sometimes the ex bosses) when a company goes under.
Well having seen this first hand ...
Many years ago I had a company that didn't turn a profit - we had to concede defeat and call it a day. Our accountant put in touch with an insolvency practitioner who quoted us £5k (hate to think what today's figure would be). In the end, we did it ourselves, sold the stock (for near full value, not the pittance it would have fetched at auction), collected whatever money we could, paid whatever bills we could, and informed companies house that we had ceased trading. I believe this was legal and still is a legal option. We figured that if any creditor wanted the full administration process, they could pay for it - funnily enough, no-one did !
Recently, a friend has ceased trading (as a sole trader) and had to go through this rigmarole. Fortunately, his brother in law was in finance, and he had a friend in the trade who owed him a favour. So luckily he managed to get out of it without charge - otherwise I believe he was looking at over £6k to go bankrupt ! How does that work then - you've no money, so you have to PAY ?
It is a rip off . full stop.
I was at a company that went into administration. The workers didn't get paid their due wages only the legal minimum that the proposed purchaser could get away with to "lose" the unwanted staff with no comeback. Most of the suppliers did not get satisfied.
Later I saw an invoice from the administrators breaking down their fees:
the cheapest was secretarial/admin services at about £50 per hour, if a senior partner was involved the rate was into the hundreds per hour, with every other staff member being somewhere in between and naturally expenses were extra. Strangely enough they managed to recover enough from asset sales and debt recovery to pay their invoices!
There should be a defined limit as to how much they can charge per hour, I have not seen many secretaries/admin staff on £100k a year, wouldn't mind a job like that myself..