Insolvency Reguations to be Modernised
New proposals to simplify insolvency regulation
The UK Government has set out new proposals to strengthen, reform and simplify regulation of the insolvency sector. The current regulatory regime has been in place for over 30 years and requires reforming to keep pace with developments in the insolvency industry.
The new consultation is inviting views on creating a single regulator for Insolvency Practitioners and extending regulation to firms that offer insolvency services. The consultation will run until 25th March 2022.
As the Under-Secretary of State, Lord Callanan says:
“The current framework dates to 1986 and has not kept pace with developments in the insolvency market. The regulatory structure is based on the individual responsibility of Insolvency Practitioners and does not consider the firms they work for. It is top-heavy for the limited size of the profession, with four recognised professional bodies responsible for regulating a profession of fewer than 1600 people, as well as the Insolvency Service, acting on behalf of the Secretary of State, as oversight regulator. Despite close collaboration between regulators and the Insolvency Service, the current model has not achieved the levels of consistency, independence and transparency which were envisioned following the introduction of statutory objectives for regulators in the Small Business, Enterprise and Employment Act 2015.”
Key changes set out in the consultation include:
- establishing a single independent regulator to sit within the Insolvency Service, replacing the current four Recognised Professional Bodies
- extending regulation to firms that offer insolvency services, as the current regime only covers individual Insolvency Practitioners
- create a public register of all individuals and firms that offer insolvency services
- create a system of compensation and redress
The government believes that the existing four membership bodies has led to weaknesses in the regulatory system. As well as a lack of regulation of firms undertaking insolvency work, the current system also lacks transparency and has inconsistencies, with different bodies making information available in different formats.
The Government is also proposing a public register that will clearly show all individuals and firms that are authorised to provide insolvency services, as well as noting any sanctions against individuals or firms from the regulator.
Furthermore, where there has been a mistake or wrongdoing by an Insolvency Practitioner or firm offering insolvency services, which has adversely affected one or more parties involved in the proceedings, there will be a new formal mechanism that will allow for compensation to be paid if appropriate.
