Government rejects call to limit insolvency firms' fees 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 …
Having seen multiple company liquidations, where myself, a friend or a partner has been owed back pay by the company, it's always seemed obscene that the insolvency companies have then been able to swallow up the entire assets realised from the company as fees, giving nobody anything back, having seemingly managed to chase up precisely no debts in a year, and not even managed to reclaim the deposit on a rented office or the like, and by their own figures only reclaimed under 20% of the book debt each time.
Nice work if you can get it...
Who gets the money? Simple:
The Liquidators
The Tax Man
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Employees
Creditors
Shareholders
You.
Neither of the first two give a damn about the people who are actually going to be affected by a business going into liquidation. People who worked there, companies who are owned money, people who own shares in that company and those who have legitimate claims for faulty products or goods ordered but not delivered are very much sucking hind tit and can pretty much forget about ever getting back anything because the first two are feathering their own nests.
Take a limited company that has £300k of debt because the owner decided not to pay HMRC for 2 or 3 years. Owner approaches an accountancy firm specialising in liquidisation and administration, and pays a little over £45k into a 'fund' that is intended to meet the costs of disolving the company.
Owner of said company walks away and sets up a new limited company, thereby ensuring that once more the owner is not liable for anything.
Accountancy firm handling the administration starts racking up the legal fees and before you know it, their fees are almost exactly £45k. Not a penny left for any creditors, including HMRC.
Owner walks away having paid less than 1/6th of what was owed, but is legally free of the debts altogether.
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Coincidentally have any of you ever asked an accountancy firm who handles administration for anything? Unless you're willing to fork out 5 grand, forget it. Events so far this year have made me believe that large quantities of money are made by the administrators. Obscene amounts. No other industry (well maybe the entertainment industry) seems to offer the potential to earn thousands of pounds for so little effort.
Sorry chaps - you are talking nonsense. It is incredibly difficult for insolvency firms to do much more than cover their costs these days. The firms don't get to pick and choose which cases they take on - every insolvent firm in the country has to be wound up. The vast majority of them have very few assets and the total recovered in these cases will not cover the combined legal, accounting and recovery costs. In these situations the insolvency firm has to accept the operating loss as a part of the job.
When a case comes along that does have some cash in it, the firm will try to charge as much as possible (naturally - we're all in business, after all) but they have to answer to the creditors. The creditors are ordinarily represented by dedicated departments in the banks and, as we all know, banks are keen to keep hold of their money. In the event of the IP charging unwarranted fees, you can be certain that they will be rejected by the creditors (read Bank) and referred to the courts.
This legislation was rejected because there is no need for it and a larger administrative overhead would be incurred if it went through.
About 15 years ago, as a one man limited company, I ended up owing about £20k to the tax man and virtually no-one else. But I had no more money coming in. My (then) accountant said it really would be best to liquidate. He introduced me to an insolvency practitioner - a mate of his, natch - who said it would cost £2k to liquidate, money up front...
I had to borrow the money from a very good mate otherwise I'd have been bankrupted.
Of course my accountant had for several years been charging me lots of money to do my ever decreasing accounts instead of advising me early on that I wasn't going to turn a profit anytime soon.
'Twas ever thus.
Boohoo - my heart bleeds for you. Must be hard to fleece all those poor employees and customers while paying your own company thousands for basically just paying yourself thousands.
That is complete and utter bollox - legislation is required as these insolvency firms are doing nothing but feathering their own nests.
Re: your useless analogy about banks - ever heard of the Banking Ombudsman or the FSA?
The only body concerned with regulation or licensing of the Insolvency Practitioner market is - yes - you've guessed it - insolvency practitioners who kind of have a vested interest.
Can you really trust a business that regulates itself?
I don't think any other business-orientated group can because of the conflict of interest.
No, I don't read the Daily Mail, I watch programmes like the BBC's Working Lunch which, for all its faults, still gives a good understanding of how these "poor" companies who find it *so* hard to earn a crust, manage to screw everyone else out of anything they might have got by charging ridiculous fees (such as hundreds of pounds for photocopying is one example I remember)...
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..
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 ?
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