Insolvency practitioner finance for IP firms

Fee recovery in insolvency follows rules that do not apply to other professions. The office-holder must have a fee basis approved, whether time costs, a percentage of realisations or a fixed fee, and can draw only from funds in the estate. That creates gaps a lender needs to understand:

• Administrations and liquidations generate heavy time costs early, in securing assets, dealing with employees and investigating directors, while realisations such as property sales, book debt collections or claims against directors can take a year or more.
• Creditors' voluntary liquidations are often funded by a pre-appointment fee paid by the directors, sometimes in instalments, which can leave the firm carrying the case before the money arrives.
• Pre-appointment and advisory work on restructurings that never lead to an appointment may be partly or wholly written off.
• IVA books pay through monthly debtor contributions over several years, steady but slow, and vulnerable when debtors miss payments or variations reduce contributions.

Against that, the costs are monthly and fixed: case managers and administrators, case management software, statutory advertising, and the enabling and specific bonds each appointment requires.

• Rising appointment volumes: demand for insolvency work tends to rise when the wider economy struggles, and firms need to hire before the fees from new cases flow.
• A large case: a single administration with significant time costs and a long realisation timetable.
• Buying a practice or case book: acquiring a retiring IP's firm, or a portfolio of IVAs or liquidations moved to new office-holders by court order.
• Partner changes: a new licensed IP buying in, or a founding partner retiring.
• Tax and VAT: fees drawn in a cluster can create a VAT or corporation tax bill out of line with normal months.

The trap in insolvency practice borrowing is funding cases that will never pay. Before borrowing against WIP, review which cases realistically have the assets to meet the time recorded, and price new work on that basis. Litigation funding and after-the-event insurance can fund an estate's claim against directors or third parties, but that is case funding agreed by the office-holder and is separate from business finance for the firm; we arrange the latter only. Where a tax bill is the pinch, a Time to Pay arrangement may be cheaper than a loan.