The Value of Insolvency
Insolvency professionals make a valuable contribution to the economy and should be paid for the value they provide (not the time they spend).
Insolvent businesses are often rescued, saving hundreds of thousands of jobs and ensuring that creditors are treated fairly. So says “Why Insolvency Matters”, the report of a ComRes survey for R3, the insolvency trade body. The best approach to restructuring is to use insolvency procedures constructively and only when necessary. Mercer & Hole are proud to be part of such a rescue culture, saving distressed businesses as illustrated in our Business Rescue Case Studies.
The Insolvency (Amendment) Rules 2015 provide that from 1 October 2015 insolvency practitioners must detail in advance the work they propose to undertake and, if they want to be paid on the basis of the time they spend, provide in advance an estimate of their fees and expenses, which will then be capped at the level of the estimate. The intention of the new legislation is to ensure that the cost of insolvency procedures is determined as far as possible by the value of the work done, rather than the time spent.
Insolvency procedures are a solution to financial distress and should not be seen as contributing to it. The transparency of the new provisions should help creditors be satisfied that the UK’s insolvency regime operates in their interests.
Date: 22nd May, 2015
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