New government fees will undermine insolvency regime, R3 warns

NEW and increased government insolvency fees introduced yesterday will undermine the UK insolvency regime and cost creditors £8m per year, R3 has warned.

By threatening creditor returns, the government could undermine the UK’s World Bank insolvency ranking, the insolvency trade body said.

“Improving this ranking was one of the government’s manifesto commitments,” said Andrew Tate, R3 president. “The government’s new insolvency fees are a very bad deal for the UK’s creditors.”

Among other new fees, the government is introducing a fee of £6,000 in every compulsory liquidation or bankruptcy, even when the case is handled by a private sector insolvency practitioner rather than the government’s official receiver. A further fee of 15% of all realisations will apply in all official receiver-run cases.

The government, which automatically handles compulsory liquidations and bankruptcies in the first instance, has also changed its guidance on passing insolvency cases to licensed insolvency practitioners.

Traditionally, the official receiver has only kept cases which are straight-forward or do not have any assets to be realised. The change will allow the government to hold onto more cases, even when a majority of creditors seek an insolvency practitioner appointment.

Unlike insolvency practitioners, the government’s official receivers are not overseen by an independent regulator and they do not have their fees approved by creditors. official receivers do not need to meet the same level of qualifications or standards as insolvency practitioners.

“The insolvency profession understands the government needs money to fund its official receivers. But disenfranchising creditors, holding onto cases its staff may not be qualified to handle, and forcing creditors to pay new, uncompetitive fees undermines the insolvency regime and will mean fewer returns,” said Tate.

“The government has introduced new fees without warning or consultation and is not working to the same standards as insolvency practitioners and is not treating creditors fairly.”

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