Principles and rules on insolvency practitioners' remuneration

Abstract

AbstractOvercharging by insolvency practitioners is a problem that has invited legislative and judicial intervention in several commonwealth jurisdictions, and it continues to be a concern in many of them. Such regulation is justified because of the failure of unsecured creditors to effectively monitor and control the practitioner's charges, leading to failure in the insolvency practitioners' services market. However, the rules on fixing the practitioner's remuneration are not always aligned with basic principles, and their applications can be challenging. From the vantage point that regulations should seek to combat market failure, this article elucidates the principles and rules that ought to apply in fixing insolvency practitioners' remuneration. It analyses who ought to be empowered to set remuneration, the rules on disclosure, the meaning of the value of services rendered and the approaches of the courts in computing value, by reference to the laws of England, Singapore and Hong Kong SAR, and suggests reforms to make the rules consistent with the identified principles.