Insolvency licensing: If it’s not broken don’t fix it

by Liz Bingham, R3

More from this author

17 Feb 2014

  • Comments
stop-sign

IF THERE WAS ONE THING you might have been able to expect the government's Deregulation Bill to do, it would be to deregulate. Unfortunately, as far as the insolvency profession is concerned, this just isn't the case.

Tucked into the Bill (alongside legislative changes on all manner of topics, from household waste to driving instructors) are proposals to introduce "partial licences" for insolvency practitioners (IPs). Partial licences would introduce two new types of licence, which could see IPs specialising in purely corporate or personal insolvency work, rather than the current licence which encompasses both.

The problem is that not only would this add red-tape to an already comprehensively regulated profession, it would risk confusion and harm for the many small businesses that turn to IPs for help.

For thousands of smaller businesses, there is a great degree of crossover between the finances of the business and the finances of the owner. In many cases, business owners will have given personal guarantees or similar undertakings to secure funding for their company. When it comes to an insolvency situation for either the business or the owner, there is nothing "partial" about it: an IP will need a working grasp of both personal and corporate insolvency to offer appropriate advice.

In a world with partial licensing, the danger is that a corporate or personal insolvency specialised practitioner won't pick up on crucial aspects of a case that they haven't been trained to deal with, or recognise. This risks causing significant problems for the individual or business down the line and undermining confidence in the profession.

Throwing the baby out with the bath water

In 2012 IPs rescued 6,100 businesses and helped save 750,000 jobs. The role the profession plays in supporting businesses and the wider economy is crucial, and its ability to play that role depends on the business community trusting the profession to be able to provide comprehensive advice when needed. Partial licences could undermine that trust.

Of course, given that personal and corporate insolvency issues are so interwoven, it is unlikely that many IPs will opt for a partial licence. In which case, what is the point of introducing them?

Even if take-up is small, new licences will require regulators to monitor two new sets of licences on top of the licence that already exists, while practices will end up with new compliance costs to cope with.

Again, it'll be the smaller businesses that lose out. Smaller practices will find it harder to absorb the costs of extra compliance than their larger counterparts. It is also more likely that personal or corporate only cases won't be dealt with by larger firms; commercial pressures mean smaller practices need to offer both personal and corporate insolvency advice to survive.

Even for the specialised IPs at the largest firms, it would be rare for them to never come across a case that didn't require knowledge of both corporate and personal insolvency.

We understand the government's desire to boost competition and cut costs, but partial licences are not the way to go about doing this. The slender benefits contained within the proposals will only be occasionally realised, and they will be consistently overshadowed by the drawbacks.

As recommended by a committee of MPs and peers, the government is still consulting on the partial licence proposals; it is important the profession is listened to and the partial licensing proposals dropped.

Liz Bingham is president of insolvency trade body R3

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

conservatoire-for-dance-and-drama

Finance-Director-part-time

Conservatoire for Dance and Drama, London, Permanent, Part Time, £60,000 pro rata

 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.