There are many different ways to decide how much Carmichael & Co will charge for the work they carry out. Sometimes we charge a fixed fee, sometimes a percentage or asset realisations and dividends, sometimes based on the Schedule 6 Scale Rate and sometimes based on how long it takes.
In most Voluntary Arrangements our fees are set as a percentage (usually 15%) of the money we receive. Some of the older ones are a percentage of the money we pay back to creditors (also usually 15%). These levels were set many years ago by the companies that represent most of the creditors, and are charged by most Licensed Insolvency Practitioners.
When agreeing a fee on a percentage basis we normally work out how much the case is likely to cost to manage, then suggest a percentage to creditors based on that. For example, we know that banking a monthly contribution of £1,000 takes the same time as one of £250, so often our fee in the larger cases is far less than 15% of realisations as we think 15% is sometimes too much. On the other hand, if the contributions are small we sometimes ask for a higher percentage since otherwise we would not cover our costs. If we ask for a higher fee and the creditors refuse, we do not expect to be paid more by the person or company offering the Voluntary Arrangement. Even though the debtor suggests what we are to be paid, our fees are agreed by the creditors.
In other types of cases as well as asking for a fixed fee to cover the ‘standard’ work we do in that type of case we ask to be paid a percentage of asset realisations as follows:
|Cash or equivalent (including bank balances held by the company or Carmichael & Co)||0%||10%|
|Other assets which are unlikely to be disputed but may need assistance from agents, such as stock or plant and machinery||10%||15%|
|Other assets which are more difficult to realise and tend to take longer to deal with (such as book debts or a property)||20%||30%|
|Assets which are likely to need a lot of negotiation to realise or tend to be most likely to need court action so take the longest to deal with (such as money owed to the company by the director, employee or associated company)||30%||45%|
These are the maximum we would charge – if a director does not admit he owes the company money, then repays it without us having to chase too hard (or do a lot of investigation), we would charge what we think is a fair amount (and less than 45%).
If creditors do not agree out fees, we can either ask again or ask the court to agree them instead. As an alternative, the law states that we can be paid on the Schedule 6 Scale Rate. This used to be known as the ‘Official Receiver’s Scale Rate’. It sets out a fee for selling the assets, and another one for when we pay money to creditors. It does not take into account that a lot of the work we do must be done (such as tax or VAT returns and controlling the bank account), which does not equate with either of these.
The Schedule 6 Scale Rate is as follows:
|on the first £5,000 or fraction thereof|
|on the next £5,000 or fraction thereof|
|on the next £90,000 or fraction thereof|
|on all further sums|
Before October 2015 there were some cases in which we asked creditors to agree that we be paid on this basis anyway, but usually with a relatively low minimum fee so that we do not have to send a lot of dividend cheques for a few pence to creditors.