Corporate insolvency market faces fair trade probe

The Office of Fair Trading has revealed that it is conducting an in-depth study of the corporate insolvency market.

The investigation will look at the structure of the market and the appointment process for insolvency practitioners. It will also search for features in the market which may result in inequalities, such as higher fees or lower recovery rates for certain groups of creditors.

It follows recent concerns raised by the government and Insolvency Service over the way insolvency practitioners are appointed.

The study will collect and analyse data from accountancy firms, law practices, government, regulators and trade bodies, with the OFT planning to release its findings at the end of 2010, unless it is necessary to conduct a second stage.

Clive Maxwell, OFT senior director of services, said: “We want to identify any potential problems within the corporate insolvency market to ensure that firms and practitioners are competing freely and that the market is working well for the end consumers. Efficient insolvency services are an important component of a modern market economy.”

Listed accountancy company Tenon welcomed the announcement, stating that it supported “our long held belief that a competitive and transparent market within the insolvency industry is in the best interests of all stakeholders, including practitioners, creditors and the public”.

The Forum of Private Business argued that the probe must deal with "phoenix" companies starting over again. It said that smaller creditors suffer when companies start up again under a different name.