Have you ever wondered how the Insolvency Practitioners can charge you £4,000 to manage an Insolvency – yet their hourly charge rate is often £400? Most of them publish their hourly charge out rates, please – go and look.
It must be a miracle of mathematics that a process that usually takes 12 months, is actually only 10 hours of work.
Either that or they are lying to you.
If Insolvency Practitioners were only paid the fee they quote you, 100% of them would be out of business within a week. Not 99%, 100%.
In fact, less than 15% of the average IPs income comes from the initial fee they charge you, the business owner.
They need to make £40,000 per insolvency, on average – so where does that remaining balance come from?
Ah, they sell the assets of the company to pay their fees!
How many smaller companies do you think entering an insolvency process have £36,000 of sellable liquid assets? Virtually zero.
The company will have some goodwill and some tatty office furniture, let’s be generous and say they get £300 for the wobbly desk.
We’ve now got £35,700 to find. Any guesses? Anyone?
That’s right – it will be you.
They are expert abusers and gaslighters. They will gently enquire as to what these payments were 2 years ago – oh and what was this payment for? You won’t remember because you were busy employing people and fighting for your business.
You’ll then receive the first of dozens of solicitors letters and the mask will be lifted.
The money they demand from you will be completely unreasonable but from the goodness of their heart – they will be willing to do a deal, because you know – they’re on your side. And then, after a torturous 18 month process, you will agree (under the threat of prison) to a 2 year repayment plan of the £35,700.
And how much of that will be returned to creditors? ZERO. They had to investigate your questionable conduct. How dare you make payments without the proper authority as the sole shareholder and Director of your own company?
And that’s what it will be. A line item in their report.
Investigatory Work – 89hrs @ £400 = £35,600
Printing – 1hr @ £100 = £100
And who are you going to appeal to? They will very calmly explain to you that you are incredibly lucky you went to them. Any other IP would have recommended jail. So best to stay quiet.
But I haven’t done anything wrong, I’ll be fine!
They don’t care, they’ll find something, there has to be something, there needs to be something. Good luck.
You may wonder why – if it’s such a small percentage of their overall fees – do they even charge an upfront fee at all? Surely if an IP claimed they had no upfront costs to liquidate, they would take the market. Wrong.
IP’s are canny. They realised that in every other element of life, when you pay someone – they work for YOU and provide a service for YOU. They need you to think they work for you.
They do not work for you. As soon as you sign that paperwork, you are their sworn enemy. You have THEIR money – and they WILL be getting it back.
So although a tiny proportion of their revenue comes from the initial ‘Preparation of Statement of Affairs’, they needed the illusion. The trick. The sleight of hand.
Do not be tricked by their lies.
Call our office if you need genuine advice.
Cheers,
Patrick
