The Government has today set out new proposals to reform and
simplify regulation of the insolvency sector.
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
These changes will help strengthen and modernise the regulatory
regime which has been in place for over 30 years and needs reform
in order be able to keep pace with developments in the insolvency
market.
The reforms will ensure a robust and proportionate regulatory
regime which enhances consistency, improves transparency and,
importantly, will also regulate firms that offer insolvency
services rather than just individual Insolvency Practitioners.
Regulation at firm level would see the insolvency sector brought
into line with other sectors such as audit and the legal
professions. The vast majority of firms offering insolvency
services are not expected to face increased costs, unless there
are instances of wrongdoing.
Business Minister said:
The proper functioning of the insolvency regime is vitally
important to support business investment and growth and to
provide a safety net for individuals in severe financial
difficulty.
Those most impacted by insolvency need confidence in the
professionals involved, and the UK regime has a strong reputation
for delivering the best outcomes possible when an insolvency
occurs. In order to maintain that confidence, the regulatory
regime must keep pace with the times and these proposals to
introduce an independent regulator will strengthen the regime and
deliver greater transparency, accountability and protection for
creditors, investors and consumers.
The Insolvency Service is currently responsible for oversight of
regulation of the Recognised Professional Bodies (RBPs), which
are responsible for regulation of individual IPs.
Following a Call for Evidence, the
Insolvency Service has found that the current framework is
disproportionately complex, with 4 membership bodies and
government all involved in regulating fewer than 1,600
individuals.
This approach has led to weaknesses in the regulatory system as
the market has evolved over recent decades. 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 which will
clearly show all individuals and firms that are authorised to
provide insolvency services, together with whether that
individual or firm has previously been sanctioned by the
regulator.
In addition, where there has been a mistake or wrongdoing by an
IP 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.
The consultation will run until 25 March 2022.
Notes to editors
The proposed changes would apply to England, Scotland and Wales.
Insolvency, including regulation of insolvency, is a transferred
function in Northern Ireland, although there is close alignment
of the insolvency and regulatory frameworks between Great Britain
and Northern Ireland.
The full consultation for reforming insolvency regulation can be
found here
