Insolvency (Amendment) Rules 2010

The Insolvency (Amendment) Rules which came into force on the 6 April 2010 introduce a more rigorous and transparent regime dealing with a trustee's remuneration and expenses.

Basis of Remuneration

Amended rule 6.138(2) provides that a trustee in bankruptcy may be remunerated on:

 

1.

A fixed fee basis;
 

2.

A time cost basis;
 

3.

A percentage of asset value basis.

Rule 6.138(3A) – different basis of charging may be fixed in respect of different things done by the trustee.

Rule 6.138(3B) – where a percentage of asset value is used, different percentages may be fixed for different things done by the trustee.

Fixing Remuneration

Where there is a creditors' committee, they will determine how a trustee is remunerated [rule 6.138(3C)].

If there is a material or substantial change in the circumstances which were taken into account in fixing remuneration or the basis of remuneration, then the trustee can request that remuneration or the basis of remuneration going forward (not already incurred) be reviewed (rule 6.142A). Once remuneration is agreed, any incoming trustee will take office subject to the agreed formula, although the incoming trustee can also make application to review the basis for remuneration (rule 6.142B).

The Right to Challenge Remuneration

A challenge to remuneration under rule 6.142 on the basis that it is excessive or inappropriate may be brought by:

 

1.

Any secured creditor or unsecured creditor with either the concurrence of at least 10% in value of the creditors or the permission of the court
 

2.

The bankrupt with the permission of the court

The court must not provide permission to a bankrupt to challenge remuneration unless there is a surplus of assets to which the bankrupt is entitled or if by reducing remuneration a surplus could arise. Any challenge must be made, within 8 weeks of receipt of the progress report on remuneration or 4 weeks if the trustee is resigning. The court may however amend the deadline for applications.

Orders on a Successful Challenge to Remuneration

The court must make one or more of the following orders:

 

1.

Reducing the amount of remuneration
 

2.

Declaring that some or all of the remuneration or expenses are not bankruptcy expenses
 

3.

The Trustee in Bankruptcy must account to the bankruptcy estate for any reduction in remuneration deemed excessive by the court
 

4.

Any other order that the court thinks just

The court may in addition make further orders relating to remuneration and expenses incurred after the period covered by the trustee's progress report:

 

1.

Fixing the basis of remuneration at a reduced rate or amount
 

2.

Changing the basis of remuneration

Unless the court orders otherwise, the costs of such applications shall be paid by the applicant and not by the bankruptcy estate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.