How a fixed fee for liquidators in CVL cases could reduce delays

Creditors’ voluntary liquidations (CVL) accounted for around 80% of company insolvencies in 2024 and remain the most common way to liquidate a business. A CVL offers an efficient way to formally close an insolvent business, with the insolvency practitioner (IP) dealing with creditors and selling assets to repay debts as far as possible. However, while a CVL offers many advantages, the current framework poses growing difficulties for IPs, particularly those in smaller practices, due to pervasive creditor apathy regarding fee requests.

Despite IPs’ repeated efforts to secure creditor approval for fees, many creditors simply do not respond. This not only causes delays, holding up the return of funds, but also adds costs with IPs having to seek court approval or, in some cases, writing off fees altogether. This is despite the principles of remuneration within the The Insolvency (England and Wales) Rules 2016 stating that an officeholder is entitled to receive remuneration for their services. 

R3 member survey

At the R3 smaller practice group forum earlier this month, 86% of delegates polled said creditor disengagement was the most pressing challenge insolvency practitioners face when securing fair fees in smaller CVL cases.

And a survey of around 100 R3 members last year also found that while two thirds reported the majority of caseload and turnover came from CVLs, nearly half (46%) had more than 10 cases where fee approval failed initially.

Introducing a fixed fee

In response, R3 is calling for a simpler, fairer approach that reflects the reality of creditor behaviour today. The trade association for restructuring, turnaround and insolvency professionals has proposed a statutory fee of £10,000 for liquidators of CVLs to reduce administrative burden, bring greater consistency, and help IPs focus on progressing cases efficiently.

Setting a statutory fee for a standard CVL would ensure fair remuneration while making the insolvency process more efficient for all parties. Importantly, a fee of £10,000 reflects estimated costs in straightforward CVL cases with almost half of survey respondents saying such cases cost between £10,000–£15,000 on average to complete.

It’s important to point out that the proposal is to set a baseline fee. Liquidators can still seek a change in the basis of their remuneration and creditors retain the right to challenge the fee under existing insolvency rules.

Creditor apathy

So, who are these disengaged creditors? The R3 survey found that HMRC and banks or other funders rarely take part when asked to vote on fee approval. Trade creditors, the Redundancy Payments Service and company directors are the most likely to respond to such requests.

One practitioner shared his thoughts on LinkedIn when the R3 proposals were published explaining: “It would be great if HMRC would get involved in this process as normally it is owed funds. As for other creditor engagement, the volume of paperwork they receive post appointment must be overwhelming and to be honest, those creditors, have more important things to do than plough through … complicated legal jargon that is difficult to understand for most.”

While there is a need to present information to creditors in the most understandable way possible such as in an executive summary, having a fixed fee for CVL cases can help to avoid difficulties when it comes to obtaining fee approval.

Next steps

The proposed reforms to the Insolvency (England and Wales) Rules 2016 are practical, proportionate, and supported by R3 member feedback.

They are just one example of R3’s mission to champion sensible reforms that benefit IPs, creditors and the insolvency framework. R3 has invited the Insolvency Service to review the proposals before scheduling a follow-up meeting to discuss them in more detail.

See the full proposals on the R3 website and LinkedIn pages.