Shining light on a ‘dark art’ – a blog by Philip King
20 February 2014
Insolvency standards, regulations and fees have been top of the agenda over the last few days.
My appointment as Chair of the Joint Insolvency Committee was announced last week. The JIC brings together insolvency regulators across the UK to set standards for the insolvency profession, and I joined it eighteen months ago as its first lay members to introduce a fresh perspective from outside the insolvency industry. It’s an honour and privilege now to become the first lay chair at a time of great challenge and change across the sector.
My knowledge of insolvency is far inferior to the experts who make up the committee so I’ll be dependent upon their experience and expertise as I facilitate discussion and the sharing of views in the development of statements of insolvency practice (SIPs). SIPs set out the standards against which IPs are monitored by their regulators and the current changes being discussed will have to feed through into the SIPs.
In addition to changes already in the pipeline, there are the proposals emanating from two recent reviews. Teresa Graham’s review of pre-packs has yet to report but the findings from Elaine Kempson’s investigation into IP fees have led to the consultation published by the Insolvency Service on Monday: ‘Strengthening the regulatory regime and fee structure for insolvency practitioners’.
In broad terms the objectives of the proposed changes are: “protecting and promoting the public interest; delivering fair treatment for those affected by IPs’ acts or omissions; encouraging an independent and competitive IP profession, whose members deliver quality services with transparency and integrity, and who consider the interests of all creditors in a particular case; promoting the maximisation of returns to creditors, and the promptness in making those returns; and ensuring that fees charged by IPs represent value for money.”
The proposals include measures to impose limits on the circumstances in which IPs can charge for their work by the hour, and giving the Insolvency Service the power to enforce the objectives outlined above including the imposing and publicising of fines and sanctions.
Hardly has the ink dried before the document is getting significant attention and drawing a range of comments. Giles Frampton, Vice President of R3 has said: “These proposals will have unintended and unwanted consequences, and it would be the UK’s creditor community that would lose out were they to be implemented.” I was asked by Deirdre Hipwell of The Times on Monday for my views and I limited my comments to welcoming the consultation and being encouraged by measures that would enhance transparency in fee-setting and conduct. The ICM has yet to seek the views of its members on the consultation and will do so shortly but, in the meantime, anything that makes insolvency less of a ‘dark art’ and more of a process creditors understand and engage in must be welcomed.
Having a lay chair of the JIC is a definite step in the right direction and I’m pleased to be part of the journey in which the insolvency and credit professions have a better understanding of each other and work more closely together.