1 Interest and the requirement to use the ISA

The Enterprise Act 2002 (s271 Insolvency Services Account: interest) introduced provisions enabling the Secretary of State to set the rate of interest credited to estate funds held in the ISA.

In practical terms this means that The Insolvency (Amendment) Regulations 2004 will provide for the Secretary of State to set the rate of interest paid by notice and to revoke the existing provision setting out the rate of interest. The rate of interest initially set in The Insolvency (Amendment) Regulations 2004 was 4.25%.  The Secretary of State, by notice published in the London Gazette may vary the rate of interest payable and this information will be published on our website www.insolvency.gov.uk.  At this stage it is intended to review the rate every six months although changes to the Bank of England Base Rate may require more frequent rate changes.

The rate of interest should ensure the maximum possible investment return to estates; however, in order to protect the solvency of the Insolvency Services Investment Account (ISIA) in terms of its ability to pay the interest due a small surplus must be retained in the ISIA.

The existing provisions setting out the rate of interest paid from the Insolvency Services Account in Regulations 9(6) and 23A (inserted following the Insolvency Act 2000 via the Insolvency (Amendment) Regulations 2001) of the Insolvency Regulations 1994 have been amended. The amendments are in The Insolvency (Amendment) Regulations 2004.  The new provisions allow the interest rate to be paid on all funds, unlike the previous position where it was paid only on balances over  £2,000.

The obligation for voluntary liquidators to deposit funds in the Insolvency Services Account has been removed. The requirement to deposit funds in the Insolvency Services Account in a voluntary liquidation was set out in Regulation 5(2) of the Insolvency Regulations 1994. This provision has been abolished to give voluntary liquidators a choice whether to pay monies into the ISA.

Please note that the obligation has only been removed for voluntary liquidations. No changes have been made to the obligations of trustees in bankruptcy and liquidators in compulsory liquidations to deposit all monies in the ISA. 

2 Payment of fees in respect of the operation of the ISA

The insolvency practitioners and Insolvency Services Account (Fees) Order 2003 makes provision for the payment of fees in relation to accounts maintained with the Secretary of State in the ISA in liquidations and bankruptcies. Provision is also made for the payment of fees in relation to the issue of cheques and other instruments and the electronic transfer of funds.

The following banking fees are payable, where an account is maintained with the Secretary of State:

An account is “maintained with the Secretary of State in respect of monies which may from time to time be paid into the ISA” where-

(a) in a winding up by the court or in a bankruptcy the Secretary of State creates a record in relation to the winding up or as the case may be, the bankruptcy for the purpose of recording payments into and out of the ISA relating to the winding up or, as the case may be, the bankruptcy; and

(b) in a voluntary winding up on the request of the liquidator the Secretary of    State creates a record in relation to the winding up for the purposes of recording payments into and out of the ISA relating to the winding up.

An account ceases to be maintained with the Secretary of State where –

(a) a request in writing made by the liquidator or, as the case may be, the trustee for closure of that account has been received by the Secretary of State and no monies to which that account relates are held in the ISA (other than any unclaimed dividends or any amount that it is impracticable to distribute to creditors); or

The following fees are also be payable:

3 Fees in relation to insolvency proceedings

The Insolvency Proceedings (Fees) Order 2004 seeks to simplify the fee structure applicable in relation to insolvency proceedings under Part 1 to X1 of the Insolvency Act 1986

The administration fee and SoS fee have been set so that they relate to cost. The shortfall on the case administration fee is cross-subsidised by recoveries from the SoS fee.

If you have any queries please telephone 0121 698 4268

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