AFSA has observed that some trustees and firms make high rates of applications to the Inspector-General for determination of trustee remuneration, whilst others rarely apply. ...
AFSA has observed that some trustees and firms make high rates of applications to the Inspector-General for determination of trustee remuneration, whilst others rarely apply.
Ongoing and clear engagement with, and communication to, creditors about the status of an estate should take precedence.
A key principle of the personal insolvency regime is that creditors should have primary control over remuneration in an administration.
The mechanism to make applications to the Inspector-General should not be considered as the primary way trustee remuneration can be approved.
IGPS15 - Determination of a trustee’s remuneration outlines the process by which trustees of a regulated debtor’s estate may apply to the Inspector-General in Bankruptcy.
Applications to the Inspector-General must be considered with regard to paragraphs 1.4 and 2 of this practice guidance.
Paragraph 3.5 outlines any “other relevant matters” the Inspector-General may consider when reviewing an application.
Data shows that during from August 2022 to September 2023:
- 136 applications were received and dealt with (i.e. an outcome was achieved).
- 7 firms submitted half of those applications.
- 2 applications were rejected, 13 applications resulted in substituting a lesser amount and 6 applications were withdrawn.
From February 2023 to August 2023, further analysis found that 31 application forms needed to be returned due to the incorrect form being used or insufficient information being provided. Half of the 31 applications returned had been submitted by 5 of the 7 high-use firms.
AFSA recognises that creditor disengagement is an issue. Trustees however must consider what strategies could be implemented within their practice to favour better communication and engagement from creditors, if required.
AFSA has also observed that applications may be defective due to an apparent insufficient consideration of each of the elements required by the legislation (under Rule 60-10 of the Insolvency Practice Rules (Bankruptcy) 2016).
This may lead to further requests for information or documentation from delegates, delay in the processing of applications, use of time and resources that could be avoided, or in some cases the refusal of the application.
Some of the issues observed include:
- Incorrect application form used and documentation missing, which may lead to rejection of the applications.
- Apparent lack of understanding of the nature of the information required by the legislation and its intention.
- Potential lack of understanding about the role of the Inspector-General delegate, whose role is to stand in the shoes of the creditor. The trustee’s office should either provide or expect questions concerning the relevant events in the administration, the challenges administering the estate, and the appropriateness of the level of remuneration sought to be determined.
- Absence of evidence demonstrating an effort to engage with creditors through an appropriate means of communication, such as via telephone in preference to a simple follow up email.
- Reliance on Work in Progress (WIP) incurred by a previous trustee without adequate submissions to illustrate the current trustee’s entitlement to that WIP.
- Potential lack of analysis and review of the WIP to ensure it is adequate in view of the circumstances of the administration, the hourly rates applied are commensurate with the degree of difficulty of the tasks undertaken, the allocation of the time has been made correctly and the narratives are sufficiently descriptive.
AFSA Practitioner Surveillance will continue to monitor all aspects of information included in applications, to inform our intelligence and monitoring activities.
For further guidance on remuneration applications, please refer to IGPS15 - Determination of a trustee’s remuneration.