INSOLVENCY NEWS
INTERVIEW
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PRACTITIONER FEES T
HE Government has introduced amendments to the Insolvency Rules to make changes to the way Insolvency Practitioner fees are approved. The provisions were laid before Parliament in March and come into effect on 1 October 2015 for new cases commencing on or after that date. The current Rules will apply to cases already started and commencing between now and 30 September. The new Rules will increase transparency around fees charged, principally by requiring IPs to give an estimate at the outset of the fees and costs likely to be incurred. Further, the estimate will act as a cap on time cost fees, so that the IP cannot draw in excess of that sum without seeking creditors’ express approval. As for expenses, the challenge will be as at present, via the 2010 Rules where windows of opportunity are provided for questions to be raised following each report to creditors. These new provisions will apply in England and Wales, and to liquidations, administrations, and bankruptcies. They will not apply to administrative receivership (which is a relatively rare procedure these days), nor corporate or individual voluntary arrangements (where arguably some creditor control already exists through the estimated outcomes provided, albeit not as a cap). Rule changes in 2010 permitted the charging of fees on a time cost, percentage or fixed fee basis, or any combination of these. This remains, and the estimate to be provided by the IP relates solely to proposals to charge on a time costs basis; this is the area where there has been some concern. The concern was the open-ended nature of those arrangements, though the 2010 Rules addressed that to some extent, and it has to be said that IPs seldom recover all of the time recorded to the job. Notwithstanding that, the focus now is on value, and the ‘fair and reasonable’ test built into the newly enacted regulatory objectives. It remains to be seen how exactly that will be measured and regulated, but the profession is working on a revision
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to Statement of Insolvency Practice 9 to make sure that the requirements set out in the SIP are in step with the new statutory provisions. As Mr Justice Ferris put it (in similar words) in the Maxwell case, whilst time spent represents the cost incurred by the IP and/or his staff, it may not necessarily represent the value of the service provided, and it is the value – the worth of the activity – that should be properly rewarded. In most cases, IPs will not have any difficulty explaining the fees they propose to charge, nor justifying increases where additional work needs to be done, but what will be new is the provision of that explanation at the beginning rather than at the end of the job. The IP estimate will need to include the rates to be charged and likely time to be spent on different aspects of the job, so that creditors can see what the estimated total cost should be, and that will encompass the expenses and third party costs (e.g. solicitors and agents) employed by the IP so that creditors have a complete picture. This should enable creditors to have a realistic view of the eventual outcome, rather than as now (in many cases) an estimated return ‘subject to costs’. Where IPs want to charge a higher fee and can justify that increase, they will have to consult creditors and seek their approval; hopefully we will see reasonable estimates when seeking initial approval to avoid routine requirements to have to revert to creditors for an increase further down the line. This will enable creditors to exercise a greater degree of control than is common at the moment. The Kempson report in 2013 wanted to increase creditor engagement, simplify oversight on fees and build in some safeguards to cater for the concerns creditors had expressed. Time will tell whether those objectives are met, but there will certainly be more information ‘up front’ and greater transparency regarding outcomes from the insolvency processes affected.
Chief Executive of the Insolvency Practitioners Association (IPA).
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A BEAUTY AND THE GEEK
Sean Feast caught up with Steven Renwick and learns how a family experience with late payment inspired a new credit management innovation.
The IP estimate will need to include the rates to be charged and likely time to be spent on different aspects of the job, so that creditors can see what the estimated total cost should be, and that will encompass the expenses and third party costs (e.g. solicitors and agents) employed by the IP so that creditors have a complete picture ...
David Kerr MCICM is the
SATAGO.COM
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CM CREDIT MANAGEMENT
The recognised standard in credit management
TEVEN Renwick started life wanting to be a scientist and is indeed a self-confessed science geek. Today, however, he is the chief executive of Satago, having developed an innovative payment and credit management tool for smaller businesses and entrepreneurs - a product that has the potential to achieve remarkable things. Like many working in the entrepreneurial ‘tech’ space, he rather arrived there by accident. Originally from Dundee, and educated locally at Monifieth High School (“I was always the bottom of the top,” he says), Steven studied to be a biochemist at Dundee University: “The university was one of the best in the country for Life Sciences and since it was on my doorstep, and Life Sciences offered some interesting career prospects, it seemed the obvious choice.” With a move to London to the National Institute for Medical Research, a promising
career almost ended before it had got going: “The building was used as the setting for the Arkham Asylum in Batman Begins and while they were filming I put a series of photographs on my website. Unfortunately, it led to hundreds of thousands of ‘hits’ (remembering that this is pre-Twitter and Facebook before everyman and his dog was sharing photos online) and the whole site nearly crashed. It nearly got me kicked off my course!” Happily it was only a minor black mark in an otherwise promising start. Having attained a PhD in Genetics, writing a paper on yeast as a model organism for cell division, he joined an Intellectual Property Transfer team in Oxford, looking at biotech businesses, and became particularly fascinated by data: “I found the data more interesting than the science,” he says, “and started to develop a data product and running the publishing side of the business.” This fascination with data was the start of a journey that would ultimately lead to the launch of Satago. Steven’s father had run a construction firm, and as a boy Steven remembered many discussions in the house about his father waiting to be paid and the stress that this caused: “Construction is notorious for late payment of suppliers,” he continues, “and it started me looking at what level of payment data was already available and where was the need the greatest.” Steven began looking at all of the major data providers, but concluded that whereas some payment data was available, it was often limited in its scope and usefulness, and often out-of-date. He also looked at how others approached payments and payment information, and especially Ebay.
The recognised standard in credit management
“Ebay was interesting because they turned the buying/selling concept on its head. The Ebay model not only allows you to rate the seller, but the seller can also rate the buyer and so you have total visibility.” With such ideas burning in his brain, Steven began dabbling with a few ideas and took time to achieve an MBA at Oxford University’s Saïd Business School – a year which he describes as probably the best 12 months of his life: “It was a real international mix,” he explains. “We had an Olympic rower, an international basketball player and various sons of the rich and famous. There were very few of what I would call ‘regular’ people.” While at Oxford (at Green Templeton College), Steven took up rowing: “I had played rugby at school, but found that rowing was my true calling. It not only makes you incredibly fit, but also teaches you to be disciplined, as anyone who has stood by the freezing River Thames at six o’clock in the morning will tell you!” Steven used his time at Oxford to explore various ideas with his course mates: “We came up with plenty of ideas and often received positive feedback but nothing in the way of investment was forthcoming.” He joined Rocket Internet, spreading his time between London and Berlin, before at last finding the investment he was looking for from Seedrs, one of the original crowd funders: “I put an idea on their site and became one of the first ever businesses to receive crowd funding equity, raising £30,000 from 60 different investors. It was small but large enough for me to build the first version of a new payment product and get us underway.” CONTINUES OVERLEAF
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INTERVIEW
CONTINUED
Credit management can be daunting for some SMEs, but Satago gives them simple access to information that is both useful and meaningful, and gives them a better understanding of their customer ...
– STEVEN RENWICK SATAGO.COM
Steven learned many lessons and learned them quickly. His idea was for businesses to share payment data, but being a data-driven model it required critical mass, and the information provided had to be useful from day one: “I was perhaps a little naïve in thinking that people would provide information altruistically,” he concedes. Not to be put off, Steven persevered, and recognising his own shortcomings, sought help from a dedicated developer, Adam Horner, who joined him in the business. Adam had been working in Silicon Valley, and the two entrepreneurs delivered complementary skills. Approaching Seedcamp, an organisation that seeks to build global success stories, they raised $1 million in May 2014, hired a larger team to build out the product, and went live in September. Like many good ideas, the concept of Satago is brilliantly simple; it helps small businesses to manage their cashflow better by fully automating their payment processes. Through the cloud, it connects with a customer’s accounting software (Satago supports more than 300 accounting platforms and uses fully secure, end-toend encryption) so that it always has upto-date information about the sales ledger. Then it enables the user to set up their own email and templates, and customise payment demand letters by customer or
For our users, we understand their cashflow as well as, if not better, than they do and so there is the scope to extend our services, perhaps even to offer finance, although that is a little way down the line ...
– STEVEN RENWICK SATAGO.COM
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The recognised standard in credit management
by the age of the debt. Any/all such letters are then automatically despatched. “In many ways it brings an Enterprise level tool to the SME user,” Steven explains, “complementing rather than replacing personal contact with customers. Users can filter debts by age, and see at a glance what is owed by a particular customer or perhaps a group of customers. Data from the ledger can be pulled in once a day, and the payment process automated based on the individual need of the customer, perhaps with a series of escalating demands. “Users can click through to individual invoices to check their status, and to review a complete audit trail of when the invoice was despatched, what reminders or statements have been sent, and see a preview of the next reminder or action to be taken. Notes can be annotated against each action via a ‘comments panel’ if the information needs to be shared with a wider team so that a full history of each invoice can be created.” The Satago platform includes other nice touches; alongside the totals outstanding is an automatic calculation of late payment interest and compensation that the customer has the right to charge if they deem fit, or to be used as part of the settlement discussion. It also links to credit information from Experian, enabling users to view the creditworthiness of potential new business, and see suggested credit limits that may be extended: “Credit management can be daunting for some SMEs,” Steve says, “but Satago gives them simple access to information that is both useful and meaningful, and
The recognised standard in credit management
gives them a better understanding of their customer.” Steven says that the use of cloud based accounting systems has helped make such new products and innovations possible. (It is possible too to connect to Desktop systems although more work is required and new software needs to be uploaded.) Costs are based on the volume of invoices generated and the number of users, and can be as little as £18 per month. The launch of Satago caused quite a stir last year and the interest of Number Ten. Steven knows, however, that there is still plenty of work to be done, and is already looking at how the product can evolve with additional functionality: “For our users, we understand their cashflow as well as, if not better, than they do and so there is the scope to extend our services, perhaps even to offer finance, although that is a little way down the line.” The future is certainly exciting; Satago has the potential to become an essential source of real time payment data for SMEs and an interesting media source, exposing the payment behaviour not just of big business, but also Health Trusts and local authorities. The level of data provided could be such that users will even be able to predict when they will get paid by certain customers, and which customers to avoid. Many of those on Steven’s MBA course have gone on to achieve remarkable things. But I personally wouldn’t bet against Satago being the product that eclipses them all.
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