SUBMISSION TO THE CHIEF MASTER ON THE REVIEW OF TRUSTEE REMUNERATION TARIFFS

The framework

Remuneration in insolvent estates is not a matter of private bargain. A trustee's remuneration is determined according to the tariff prescribed under the Insolvency Act 24 of 1936 and is subject to taxation by the Master, who has the power to adjust it in appropriate cases. Liquidators are remunerated on the same essential model under the winding-up provisions of the previous Companies Act, preserved in transition: tariff first, taxation second. On the business rescue side, regulation 127 of the Companies Regulations 2011 prescribes hourly rates that scale with the practitioner's licence category and the size of the company under supervision. The Association's submission deals principally with the trustee and liquidator tariffs, which are calculated on what the estate realises.

The economics of the modest estate

A realisation-based tariff works tolerably where the asset base is substantial. It fails at the bottom of the market, and it is at the bottom of the market that most estates — and most emerging practices — live.

A modest estate demands the same statutory sequence as a large one: security lodged with the Master, statutory notices, meetings of creditors convened and minuted, claims proved under section 44 of the Insolvency Act, the estate investigated, accounts drawn, objections dealt with, and a distribution or contribution account confirmed. The work is largely fixed; only the realisations shrink. On the smallest estates the tariff yields remuneration that does not meet the cost of performing the statutory duties, and the shortfall is carried by the practitioner.

That is an economics problem with a transformation dimension. Newer and smaller practices — precisely the practices the Association exists to bring into the profession, and the practices to which modest estates are most often assigned — absorb the loss-making work while established practices hold the estates on which the tariff actually pays. A tariff that undercompensates modest estates operates, in effect, as a levy on new entrants.

What the Association proposed

Without disclosing figures that remain under discussion, the submission asks for five things:

• a minimum-remuneration floor for estates below a defined asset threshold, so that the statutory work of the smallest estates is not performed at a loss;
• published taxation guidance applied uniformly across the Masters' offices, so that identical work is not remunerated differently from one province to the next;
• express recognition in taxation of necessary statutory work that generates no realisations — notices, meetings, reporting and compliance — rather than treating realisations as the only measure of effort;
• a published review cycle, so that tariffs are revisited on a predictable schedule instead of standing still while the cost of practice moves; and
• coherence with the business rescue side, where the regulation 127 structure already recognises that remuneration should track the practitioner's category and the size of the matter.

Taxation is the safeguard — apply it consistently

The submission does not ask for remuneration without scrutiny. Taxation by the Master is the integrity mechanism of the system, and the Association supports it without reservation: creditors are entitled to know that what a practitioner takes from an estate has been examined and approved. The Association's concern is consistency. Where taxation practice differs between offices, practitioners cannot price their work, creditors in different provinces receive different treatment, and the discipline the mechanism is meant to impose dissolves into local habit. Uniform guidance protects everyone the system serves.

Next steps

The Association will participate in any further consultation the Office of the Chief Master convenes, and will report to members as the review progresses. Members who administer modest estates are asked to share cost data with the secretariat — anonymised where necessary — because the strongest form of the argument is arithmetic. The full submission may be requested through the contact page, and related commentary on appointment practice appears in the Association's statement on transformation policy.