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INSOLVENCY PRACTITIONER’S FEE DISCLOSURE GUIDELINES ISSUED BY THE SUPREME COURT
On 17 December 2003 the Supreme Court issued a Practice Note which will be relevant in any administration in which the Court could be required to approve a practitioner’s remuneration.
This can occur not only in Court appointments (either receiverships, provisional or official liquidations) but also in Voluntary Administrations, voluntary windings up and formal Schemes where creditors either fail or refuse to approve the practitioner’s remuneration claim or where the Court is asked to review or fix a receiver’s or scheme manager’s remuneration under sections 411 or 425 of the Corporations Act.
A full copy of the Practice Note (number 126) can be viewed at www.lawlink.nsw.gov.au
The provisions of the Practice Note are similar, at least in intention, to the requirements contained in the IPAA Best Practice Statement regarding Remuneration.
In short, the Practice Note requires the administrator to disclose the hourly rates for all persons likely to be involved in the administration and to provide an estimate of the future costs of the administration, either to completion or to an identified future milestone, in their first report to creditors. Should there be subsequent changes in the relevant hourly rates or the future estimated costs then the Practice Note requires an updated report to be issued to creditors.
Because of the potential for the Court to be involved in approving remuneration in each of the different types of administration, practitioners should be aware of these requirements when preparing reports either as voluntary administrators, liquidators, receivers or scheme managers.
It should be noted that the terms of the Practice Note are guidelines only. Non compliance will not necessarily result in the Court refusing to approve remuneration or in reducing remuneration that has otherwise been approved by creditors. However, compliance (or non compliance) with the terms of the Practice Note will be a matter which the Court is entitled to take into consideration in exercise of its discretion in relation to remuneration applications and, for that reason, compliance with the terms of the Practice Note is likely to better ensure approval of the remuneration claim.
For any questions on this or other insolvency related topics, please contact Stephen Mullette of our Insolvency Team.
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