A firm must, at all times, ensure that it is able to meet its liabilities as they fall due.
A firm must ensure that, at all times, its prudential resources are not less than its prudential resources requirement.
the total value of its relevant debts under management outstanding on that date; and
the sum of:
The definition of relevant debts under management refers to a debt due under a credit agreement or a consumer hire agreement in relation to which the firm is carrying on debt adjusting or an activity connected to that activity. The reference to "debt due" covers not only amounts that are payable at the time the prudential resources requirement is calculated but also amounts the borrower or hirer1 is presently obliged to pay under the credit agreement or the consumer hire agreement1 in the future.
To determine a firm's prudential resources requirement for the period beginning on the date on which it obtains Part 4A permission and ending on the day before its next accounting reference date, the firm must carry out the calculation in CONC 10.2.5 R (2) on the basis of the total value of relevant debts under management the firm projects will be outstanding on the day before its next accounting reference date.
Activities carried on by a person acting as an insolvency practitioner (within section 388 of the Insolvency Act 1986 or, as the case may be, article 3 of the Insolvency (Northern Ireland) Order 1989) or by a person acting in reasonable contemplation of that person's appointment as an insolvency practitioner are excluded from the regulated activity of debt adjusting. A debt in relation to which a person is acting in such a capacity is, therefore, excluded from the calculation of its relevant debts under management (but a debt in relation to which the same person is not acting in such capacity and is carrying on debt-adjusting is included in the calculation).
If a firm has 1000 relevant debts under management and each of those debts is £10,000, the total value of the firm's relevant debts under management is £10,000,000. If the firm does not carry on any other regulated activity to which another higher prudential resources requirement applies, its prudential resources requirement is £20,000. This is calculated as follows:
If during the following year 20% (£200) of each relevant debt under management is paid off by the borrower or hirer leaving an outstanding balance of £800 on each relevant debt under management,and during that year the firm does not carry on debt adjusting in relation to any further debts due under credit agreements or consumer hire agreements, the total value of the firm's relevant debt under management is £8,000,000. If the firm does not carry on any other regulated activity to which another higher prudential resources requirement applies, its prudential resources requirement is £17,000. This is calculated as follows:
If a firm experiences a greater than 15% increase in the total value of its relevant debts under management compared to the value used in its last prudential resources requirement calculation, it must recalculate its prudential resources requirement using the new total value of its relevant debts under management.