Typical fees/process for dealing with additional creditors after MVL.

[anonpreneur]

My business went through an MVL earlier in the year.

Recently a potential creditor has come forward and the IP have requested data for any further creditors which has been supplied to them.

These are names, email addresses and an account credit balance which when the business was trading - would have been paid via PayPal.

I have proposed that they contact these email addresses, confirm their PP details and simply send them a payment for the amount stated which obviously would be covered by the estate.

They are claiming that this is not possible and the process they must follow is to contact each creditor with a proof of debt form, which they must then process, followed by a bank transfer which also requires a phonecall + processing time and fees.

This is to be worked on a time/cost basis and they won't give any estimate on exactly what this will be?

My question is, is the above necessary/usual/reasonable as it feels pretty avaricious?

 

[Lisa Thomas]

Hello

Yes it's reasonable. Yes it's necessary.

The issue here is the majority of Directors had to swear a Declaration of Solvency confirming that the company was solvent and could pay all of it's creditors, and interest within 12 months.

Ideally, all creditors would have been settled prior to the MVL to keep the liquidation simple.

Directors lose their control once the company is liquidate. The liquidators have a duty to obtain, adjudicate and pay the creditors and any interest now due. There is a statutory process they have to follow.

They will be unable to exactly estimate how much the additional costs will be as, because they are charging on a time spent basis, it depends on how long it takes to sort. That will depend a lot on the creditor themselves. How quick they are to respond. Whether you accept or dispute the debt claimed etc.

You say it's a 'potential' creditor, which suggests this is not a simple case of an approved creditor that has slipped through the net. You also say you have now given them a list of creditors, which suggests there are multiple debts to now sort.

 

[Frank Wessely]

Hi @anonpreneur

I will take a different view to @Lisa Thomas although what she has said is entirely reasonable.

You should ask the IP for a fixed quote for this work. Yes, there is an element of “unknown” for the IP as to exactly how much work this will require but the amounts owed to all creditors should have been included in your Statutory Declaration of Solvency which was sworn before a lawyer.

The IP will follow the process set out above. For any creditors who fail to prove their claims the IP can set a formal deadline, thus excluding those who haven’t proved. Then they can declare and pay the dividend.

Without knowing why other potential creditors may have been omitted you are where you are. The IP cannot complete the MVL without doing this work but based upon their experience and the facts of the case there should be no reason why a fixed quote cannot be provided. If agreement cannot be reached with the IP then the MVL is in limbo and cannot be closed. This will be unattractive to the IP as there are ongoing costs in keeping a MVL open. It is presumably unattractive for you too as I assume that you would like the MVL closed ASAP.

If a way forward is not agreed then the fallback obligation for the IP is to declare the company to be insolvent and convert the procedure into an insolvent liquidation. This will not be welcome for them as it will mean much more additional work for the IP for which they are unlikely to be paid, given your narrative. This should be an incentive for you both to reach an agreement in respect of the MVL fees.

I recommend that you go back to the IP accordingly.

Thanks.

 

[Lisa Thomas]

I suspect the fee basis was already approved pre liquidation.

My guess is that it was a fixed fee for the MVL but extras to be charged on a time spent basis, should any extra work, outside of the original scope, be required which seems to be the case here.

 

[anonpreneur]

I suspect the fee basis was already approved pre liquidation.

My guess is that it was a fixed fee for the MVL but extras to be charged on a time spent basis, should any extra work, outside of the original scope, be required which seems to be the case here.

Hi Lisa,
This is correct. There was a fixed fee agreed which was low compared to other quotes on the basis there were to be no creditors as these would be settled as far as practicable.

One additional creditor has come forward relating to a debt that was not disclosed in the declaration of solvency - this was a genuine omission and I have complied with a request for data relating to this and other similar claims which have not been forthcoming. These are all nominal sums (under £10) bar the initial creditor request.

The initial offer they made for the additional work was 2x the initial fee agreed which I felt was avaricious, they subsequently came back with a time/cost basis proposal but absolutely no guidance on what the fee structure might look like.

My argument remains that there must be some sort of standardised costings for.

- An initial notification to be emailed to the list.
- A cost for processing each distribution once this has been established at the deadline for claimants to respond.

They are claiming the proof of debt form is a statutory requirement but as I would not contest any of these transactions I am reluctant to pay for processing of this.

 

[Lisa Thomas]

Unfortunately this is a known theme for the low MVL IP chargers.

They charge about 1k and then make up for it by adding numerous charges for extras post liquidation.

 

[anonpreneur]

The initial fee was a lot more than 1k!

 

[anonpreneur]

@Lisa Thomas @Frank Wessely

Thanks both for your insight.

By way of an update - as suggested I went back to IP and requested a clearer, fixed-cost proposal.

This email was ignored for 3 weeks until I chased yesterday to request again, along with a formal complaint (about this and several other matters).

This was responded to today with an offer to carry out the initial work, up to the 'logging of proofs' for a fee of £7.5k. I should mention they had initially proposed to charge £10k - when I objected to this they responded with the non-descript 'time/cost' basis as per the initial post.

So this has been reduced by 25% but it still feels like a number that has been completely plucked out of thin air and is ridiculous for basically sending out a bulk email...

I still have no clarity on the proposed fee for the subsequent processing of the proofs + distribution fees.

My question really at this point is what my options and obligations are?

The IP has stated that they don’t expect the situation to threaten the solvency of the Company or the statutory obligation to discharge within 12 months.

The estate is due VAT and Corporation tax refunds which would cover the total of the potential debt (including the 7% interest) were it all to be claimed (which is highly unlikely).

I understand I can now complain directly to the Insolvency Complaints Gateway but I'm not sure what that will achieve?

What happens if I simply refuse to pay anything further?

 

[Frank Wessely]

Hi @anonpreneur

So taking into account that this additional claim will be covered by tax refunds anyway I am struggling to see any basis for the requested significant fee increase. The company will remain solvent anyway according to your narrative. Therefore primarily it is the IP’s problem, not yours.

Accordingly you could offer £1k as a one off additional fee which seems reasonable to me. Or play hardball and just leave the IP to get on with their job. There is no likelihood of the company becoming insolvent so I suggest consider one of these options and if no joy a complaint via the Gateway is your fallback.

Thanks.