OFT wants "far-reaching reform" of corporate insolvency regime

Corporate insolvency regulation needs "far-reaching reforms", according to the Office of Fair Trading (OFT).

The OFT's eight-month study into the corporate insolvency regime has found that the current system fails to protect secured creditors sufficiently, and raised concerns about insolvency practitioners' (IPs') actions in certain circumstances.

An industry-funded independent complaints handling body should be introduced, with broad powers to review IP fees and actions, impose fines, and return overcharged fees to creditors.

The Insolvency Service should be repositioned as the dedicated oversight regulator of the other licensing bodies, withdrawing its role as a direct regulator of IPs, the report also recommends.

"Smooth entry and exit of firms is an important feature of a competitive economy, and while we have found that the corporate insolvency market works well in supporting this outcome in the majority of cases, unsecured creditors are insufficiently represented and protected," said Clive Maxwell, OFT senior director of services.

"Our recommendations, if enacted would benefit both the wider economy and good insolvency practitioners, without imposing burdens on the taxpayer."

More to follow.

Further reading:

Insolvency watchdog under fire

Regulator risks its reputation, insolvency profession warns