The UK government has, this week, published its plans to reform insolvency regulation, based on the results of a public consultation held under the banner of ‘The future of insolvency regulation’ which ended in March last year.
It will come as no surprise that the plans focus on increasing regulation within the sector.
The headline reform addresses the current absence of regulation for firms offering insolvency services – at present, only individual insolvency practitioners are subject to regulation.
Additionally, a central public register will be created, listing all those authorised to provide insolvency services – both individuals and firms. The register will include notice of any sanctions brought by regulators against those on the list.
Respondents to the consultation were “overwhelmingly supportive” of the proposals. This was reflected in the thoughts of the insolvency practitioners I spoke to when the plans were published earlier in the week.
Colin Wilson, Partner at Opus, told me that “the move to regulating firms as well as individual insolvency practitioners will be a positive change, which should improve professional standards, just as the creation of a public register of insolvency practitioners and firms will increase transparency.”
Similarly, Rehan Ahmed, Managing Director at Quantuma, called the public register “a great idea” which “will give clarity and confidence to the general public that who they are seeking advice from is a bona fide practice.”
Another proposed change mooted at the start of the public consultation was the creation of a single regulator for insolvency practitioners to replace the role of the four recognised professional bodies that currently cover the sector (as we reported on in January 2022).
Plans for a new central regulator have been dropped, however. Instead, the government will “challeng[e] the current four professional body regulators to deliver significant and measurable improvements to the quality of regulation through non-legislative means, whilst keeping options to replace the current regulatory model with a single regulator of insolvency practitioners under review”.
The government has said it will provide the four bodies – Institute of Chartered Accountants in England and Wales (ICAEW), Insolvency Practitioners Association (IPA), Institute of Chartered Accountants of Scotland (ICAS) and Chartered Accountants Ireland (CAI) – “with additional tools” and “work with [them] to deliver transformational improvements to the regulatory framework without the need for legislation”.
On the development of regulations within the existing regulatory bodies, Rehan Ahmed said: “Whilst the industry is already heavily regulated and most do a fabulous job, it is great to see there is a proposal to scrutinise insolvency practices and make them more accountable. It suggests that any regulations may be akin to those of the Law Society whereby, if a practice is failing to provide the right level of service, the relevant body will intervene.”
The government’s response to the consultation also includes plans to:
On this final point, Colin Wilson added: “The proposal to reform the current bonding regime is also welcome, but it is important that the government provides more details without delay to demonstrate how any new system will work in practice.”
Although this week’s announcement has come nearly eighteen months after the public consultation ended, the reforms are still only plans, which the government says it “will take forwards when parliamentary time allows.”
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