Consultation on insolvency profession launched

THE INSOLVENCY SERVICE has launched a consultation in response to last year's Office of Fair Trading (OFT) investigation into the corporate insolvency profession.

The consultation will look at three main areas in the industry including, creating an independent complaints body, changing the current regulatory framework and legislation. The OFT investigation took place with a view to examine the weak position of unsecured creditors in corporate insolvencies.

Ed Davey, Business Innovation and Skills minister with responsibility for insolvency, said: "The helpful report published by the OFT in June last year recommended to government a number of changes to the corporate insolvency regime to ensure that insolvency practitioners deliver the best possible outcome to all creditors.

"The consultation I am launching today includes proposals for an independent complaints body, and is of great significance to all those who are affected by the insolvency regime."

Steven Law, insolvency trade body R3 president, welcomed the consultation however he believes unsecured creditors need to want to take a more active role in these type of proceedings.

"Under the current system, unsecured creditors already have the ability to influence the insolvency actions and fees of the IP but rarely engage in the process," he said.

"Unfortunately there is rarely enough money in the pot to pay all creditors in most cases, and those in a lower position will lose out. While this may frustrate unsecured creditors, this system ensures creditors will lend in future, which encourages entrepreneurship to the benefit of UK Plc."

The consultation will look at possible changes to regulatory framework that will affect both corporate and personal insolvencies. It closes on 6 May.

David Kerr, CEO of the Insolvency Practitioners Association, said: "Proposals for dealing with complaints about fees need careful consideration, but we remain broadly supportive of the need for greater transparency and accountability.