Introduction
I have written several articles on insolvency practice covering both liquidation and corporate rescue proceedings. I have been asked many times to explain how insolvency practitioners are paid. I hope this article will assist many people.
Remuneration of a liquidator
This is regulated by section 48 of the Insolvency Act (Chapter 6:07) or “the Insolvency Act”. The key provisions of the section are as follows:
- A liquidator is entitled to a reasonable remuneration for his or her services and for expenses incurred by him or her in the administration of an insolvent estate. The remuneration must be taxed (approved) by the Master of the High Court.
- Every liquidator must keep time sheets with the level of experience and expertise of persons doing the work and lodge them with the Master if the amount of the remuneration becomes an issue.
- The liquidator may apply to the Master for an increase in remuneration after giving at least 14 days notice to proved creditors who will be affected by the increase.
- The Master may for good cause increase or decrease the liquidator’s remuneration.
- The Minister may by notice in the Government Gazzette amend the First, Second and Third Schedule.
Statutory Instrument 126 of 2023 provides for the remuneration of liquidators. Under Sceond Schedule, Item 1 [Remuneration of Liquidator – sections 48(2) and 136(1)] a liquidator appointed under the provisions of this Act is entitled to remuneration at the following tariffs:
- On the proceeds of and any income or rentals arising from any property which was subject to the rights of a secured creditor in respect of the gross amount reflected in each encumbered asset account—
(a) on the first $15 000……………………………………………….8%
(b) on the next $10 000 ………………………………………………6%
(c) on the balance ……………………………………………………5.5%
(d) minimum fee ………………………………………………………………..$5 000
- On the gross amount of the free residue of the company, including any surplus brought into the free residue from an encumbered asset account—
(a) on the first $15 000…………………………………………..13.5%
(b) on the next $10 000 …………………………………………….11%
(c) on the balance ……………………………………………………..8%
(d) minimum fee ……………………………………………………………….$5 000
- On the gross turnover of any trading or carrying on of business—
(a) on the first $5 000………………………………………………..2%
(b) on any excess over $5 000 ……………………………………3%.
- On the value of any asset taken over by a creditor with the consent of the liquidator minimum fee is 2%.
- A liquidator shall be entitled to recover travelling expenses incurred during the course of his duties at a rate to be determined in the discretion of the Master.
Remuneration of corporate rescue practitioner
This is regulated by section 136 of the Insolvency Act. Some of the key provisions include the following:
- The corporate rescue practitioner is entitled to charge an amount to the company for remuneration and expenses of the practitioner in accordance with the Second Schedule, Item 1, which may amended by the Minister from time to time.
- According to section 136(2) the practitioner may propose an agreement with the company providing for further remuneration.
- To the extent that the corporate rescue practitioner’s remuneration and expenses are not fully paid, amounts will rank in priority before the claims of all other secured and unsecured creditors.
- The Master may for good cause increase or decrease the corporate rescue practitioner’s remuneration.
Statutory Instrument 126 of 2023 provides for the following remuneration for corporate rescue practitioners, under Second Schedule, Item 3 [Remuneration of Corporate Rescue Practitioners – section 136(1)]. A corporate rescue practitioner under the provisions of this Act is entitled to:
- On gross sale or turnover (on gross income value) – 3%.
- On disposal of assets or business units (on gross assets) – 3%.
- On securing an investor (on investment) – 3%.
- On arranging loan finance – 1%.
- On carrying on of reconstruction or other schemes by which the affairs of the company are reconstructed are re-organised (on gross assets) – 3%.
- Where a company is not trading or making sales then charges will be based on time basis prescribed by the Estate Administrators Council from time to time.
Conclusion
The remuneration of insolvency practitioners i.e. liquidators or corporate rescue practitioners is regulated by the Insolvency Act, as may be amended from time to time.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations) MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He was recently appointed to sit on the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@hofisilaw.com or gohofisi@gmail.com. Visit www//:hofisilaw.com for more articles.
